The recent mark up in global steel prices may provide an opportunity for Indian companies to increase prices. However, the appreciation of the rupee against the dollar will make steel imports cheaper and restrict any sharp rise in prices by domestic producers.
Hard Rolled Coil (HRC) prices have gone up by $55 to $20 a tonne across countries, except for Europe in the second half of November. Despite low demand, ArcelorMittal, one of the largest producers of steel in Europe, recently increased prices by $51 to $640 a tone, on the back of a rise in prices in China and the US, said an analyst.
Steel prices in India has fallen to Rs 33,375 a tonne in November from Rs 35,000 last month, owing to weak demand. The Index for Industrial Production (IIP) fell by 0.4 per cent in September. The manufacturing sector, which constitutes about 76 per cent of industrial production, dipped by 1.5 per cent from a year ago.
However, there were signs of an economic revival in October. Sentiments have improved with the Government’s industry-friendly measures. Most automobile companies including Maruti Suzuki, Mahindra and Mahindra, Hyundai, Audi and Toyota Kirloskar reported robust growth in domestic passenger vehicle sales in October. This, analysts say, will boost steel companies’ confidence to increase prices.
RELIEF IN SIGHT
The pickup in global steel prices is set to provide relief to Indian steel companies which are reeling under slowing demand and rising cost.
“Indian steel prices are aligned to international prices. In view of the cost push, international prices have firmed up in the last few weeks,” said an Essar Steel spokesperson.
Contrary to the global trend, iron ore prices in the e-auction conducted by NMDC remain elevated largely due to supply constraints on the back of mining restrictions in Odhisa, Goa and Karnataka.
”We expect Indian domestic steel prices to firm up in the coming months, since the current prices are not sustainable. The margins have come under severe pressure during the last couple of months in view of the falling prices,” said a steel company official.
The export offers for HRC from China and CIS (Commonwealth of Independent States) have firmed up recently by about $15-30 to $525-535 a tonne (fob). With the import prices going up, HRC prices in India are set to increase by at least Rs 1,000 – Rs 1,500 a tonne to about Rs 36,000.
suresh.iyengar@thehindu.co.in