Domestic steel prices have continued to rebound during the past few months propelled by firm demand and higher raw material prices. The weaker monsoon meant that pace of construction activities also was not impacted much while the recent rise in prices of coking coal and iron ore have also forced steel makers to raise prices, said analysts.
Steel prices are up by around ₹2,000 a tonne on a blended basis since July-end, as per industry sources. The prices of long and flat steel products, after softening till June-July, however, are up more than 10% and 4% in the past two and a half months, analysts say. The rise has been higher in the long products that are used in construction activities while flat product prices saw slower pace of rise.
The demand momentum remains strong in the country led by government spending in the pre-election year.
Jayanta Roy, senior vice-president & group head, Corporate Sector Ratings, ICRA said, “We have revised our steel demand growth estimates upwards to 9-10% in FY24.”
However, Roy feels that even though domestic prices have been rising, international prices remain much lower than domestic prices. “International prices have not moved much, and domestic markets are at 9-10% premium. Unless international prices move up domestic prices may not sustain,” said Roy.
International steel prices remain under pressure amidst slowdown concerns in developed countries. The rising interest rates have led to a rise in the cost of funding of projects. Also, China has still not seen pickup in demand as was earlier anticipated post easing of covid-led restrictions at start of 2023. The China real estate and property market remain under pressure. Roy said, “Small incremental steps have been taken by China in terms of incentives like interest rate cuts, etc , compared to massive infrastructure push seen earlier.”
China production, however, has not been curtailed and so exports from China remain strong in international markets putting pressure on international steel prices, said industry officials. Also, this is limiting export opportunities for Indian steel producers. The exports in Q2 may be lower than Q1 for steel producers.
The sharp rise in coking coal and iron-ore prices though is a concern and may put pressure on profitability of steelmakers that do not have captive resou-rces, though rebound in steel prices will cushion impact.
