Posted on 17 Jun 2022
Having nosedived 20% in the two months till June 8 on poor demand, domestic steel prices are set to fall further, according to analysts. Steel mills, on the other hand, feel prices have bottomed out.
Hovering at Rs 36,750-39,800/tonne in January-July 2020, prices of benchmark product hot-rolled coil (HRC) started picking up from Rs 38,750 a tonne in the first week of August 2020 to reach its peak at Rs 78,800 a tonne in the first week of April this year. Though the rise was not steady, prices never fell below Rs 53,750 per tonne in the whole of 2021.
However, as a fall-out of the Russia-Ukraine war that started in late February, domestic steel prices started falling after reaching its peak in the first week of April. As on June 8, HRC prices in the wholesale market of Mumbai stood at Rs 63,100 a tonne.
“Anticipation of a further price decline has kept the buyers on the sidelines both in India and abroad,” said Kalpesh Padhiar, an analyst in SteelMint.
JSPL’s MD VR Sharma said, “The demand, both in India and overseas, will increase only after the Russia-Ukraine war stops. This will also reduce the cost of energy. Import into India is also costlier now because the currency is costlier. At the moment, there is no import into India.”
Rubbing the wound, the government imposed 15% export duty on exports of steel from May 22 that robbed off their competitiveness in the export market. Demand has also been muted from overseas buyers. Coupled with the muted domestic demand, this led to a glut in the domestic market. Steelmakers, though, have not yet pruned their capacity utilisation.
Steel analysts are predicting up to 13% other reductions in the prices from the current level.
“HRC will stabilise around 62,000 per tonne. Moreover, demand dried up and buyers are opting for a wait watch mode,” one analyst said. A second analyst said HRC prices will come down to Rs 55,000 per tonne by August, as removal export duty is unlikely before the next Union Budget
“Larger steel players will be in big trouble due to huge inventory at their factories, and companies will be forced to cut production by the end of June; otherwise they will end up with more losses,” said a third analyst.
While the fall in steel prices is impacting the spreads of steelmakers, Nomura in a note on May 31 had said, “We do note modest moderation in coking coal prices by $13/tonne week-on-week to $478/tonne and cut in NMDC iron ore prices by `600 per tonne for iron ore lumps to Rs 5,500/tonne and fines by Rs 750/tonne to Rs 4,410/tonne providing partial relief on spreads.”
Source:Financial Express
