Domestic steel prices have fallen below the landed cost of imports and have added concerns for large steel companies which have recently added fresh capacity.
Leading steel companies including Tata Steel, JSW Steel and JSPL have recently completed a major chunk of their brownfield expansion and more capacity will go on stream before next March.
Domestic hot rolled coil prices are currently hovering at ₹48,000 a tonne, while that of imports from China were at ₹51,500 a tonne. Similarly, shipments from South Korea and Japan were quoted at ₹48,600 a tonne and ₹48,179 a tonne, according to BNP Paribas Exane report.
The industry expects the stimulus announced by China will boost global steel prices and offer an opportunity for Indian steel companies to hike prices in the coming months.
Jathin Kaithavalappil, Assistant Vice President at Choice Broking, said that steel prices below the cost of imports will squeeze margins, particularly for integrated players and the market will stabilise once the demand picks up from automobile and infrastructure sectors.
“While short-term problems remain, the medium-term outlook depends on the sustainability of the revival in domestic consumption and the stabilisation of the global market,” he added.
After falling sharply, iron ore prices have started moving up in hopes of recovery in the Chinese economy. NMDC has hiked lump iron ore (of 65.5% iron content) prices to ₹6,350 per tonne from October 23, compared to ₹5,750 per tonne fixed on October 1. Similarly, fines (64 per cent iron content) prices in the same period were hiked to ₹5,410 a tonne against ₹5,010 a tonne.
Margins of steel companies may come under pressure with the increase in raw material prices and lower steel prices.
Incidentally, India is the only large economy showing robust growth in the consumption of steel, with a double-digit increase of 13 per cent in the first half of this fiscal, according to the Ministry of Steel.
However, steel imports have risen significantly for the first half of FY25 as compared to the same period last year. The steel imports in the first six months of this fiscal increased 41 per cent to 4.73 million tonnes against 3.32 mt logged in the same period last year.