The Hindu Business Line : `Steel prices set to go up after Budget'

Uptrend
Arcelor Mittal announces 5% price hike in flat carbon steel products effective April 1.US steel majors are likely to increase prices by a similar quantum.
Domestic prices of base and precious metals going up.

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Mumbai Feb. 23 Steel seems set to follow cement. Steel prices in the country are poised to rise in line with the international trend of rising prices. Experts in the industry are expecting steel prices to increase, after the Budget.

Steel companies abroad have raised prices by 3-5 per cent across the board. Arcelor Mittal, the world's largest steel producer with a capacity of more than 120 million tonnes per annum, has announced a 5 per cent price hike in flat carbon steel products effective April 1.Prompted by Arcelor Mittal's move, the other US steel majors are likely to increase prices by a similar quantum, which translates to $20-30 per tonne across hot rolled and cold rolled products, which are currently ruling at $680 per tonne and $780 per tonne respectively.

"The movement in steel prices is definitely upwards as there is a good demand from the auto and housing sectors. With prices of other metals — both base and precious — such as nickel, gold and silver going up, there is a strong possibility that steel may follow suit. The coming Budget may provide a trigger for the industry to raise prices," said Mr Naresh Chandan, Chief Executive Officer, Kalapurna Steel and Engineering.

Last month, domestic steel prices moved up by Rs 100 to Rs 300 per tonne.

Reversal trend

However, this month has been witnessing a reversal: long steel in the production centre of Ghaziabad remained flat at Rs 24,200 per tonne between February 15 and February 23. At the consumption centre of Mumbai, it fell by Rs 100 to Rs 25,200 on Friday alone.

"Steel companies may not hike prices drastically with inflationary concerns looming large. Steel prices are expected to rise whatever the concessions in the Budget, but the quantum of hike may be modest," said Mr Ramesh Aiyer, Assistant Vice-President, NCDEX.

Interestingly, just three months back , Mittal Steel and other steel manufacturers in the US had announced partial closure of a few blast furnaces in response to a slowdown in domestic demand and significant increase in imports from China. Imports from China to the US nearly doubled in calendar year 2006.

Revival path

However, the revival of demand, led by automakers, and reduction of export rebate in China, have put the US steel industry on the revival path. Since the elimination of 8 per cent export rebate in China on billets on September 15, 2006, billet export prices to the US have moved up from $380 per tonne in October 2006 to $417 per tonne in January 2007 (an increase of 9.8 per cent).

China is the benchmark for price discovery in steel globally. "We believe that an increase in steel prices by China is likely to lead to increase in prices globally,"he said.