The Hindu Business Line : NCDEX: Steel ingots futures set to correct lower

Mumbai, April 6 Soaring steel ingots futures on NCDEX is all set to correct lower, before it takes off again. In last three months, steel futures on NCDEX jumped 50 per cent to Rs 35,100 a tonne on the back of rising demand from China as well.

A significant mark up in raw material prices has also contributed to the bull rally. A major factor that drove steel prices was the demand-supply mismatch. According to the Steel Ministry, production of finished carbon steel in 2007-08 (April-January) fell by 5.70 per cent to 46.57 million tonnes (mt). On the other hand, consumption grew 0.14 per cent to 43.92 mt. During the same period, imports rose 38 per cent to 5.679 mt and the exports were down 17 per cent to 3.90 mt.

A steep hike in export duty imposed by China on 80 steel products such as steel wire, sheet and plate, billets, ingots and pig iron pushed up prices in the international markets. It also scrapped or lowered a range of export rebates to curtail mounting exports and curb excessive production.

This had led to the lower exports and hence affected supply in the importing countries.

In February, China’s export of steel billets was nil and that of rolled steel 3.11 mt, a record low since May 2006. According to the China Iron and Steel Association forecast, the country’s exports of crude steel may decline to 52.5 mt this year, a 27 per cent less than last year.

India steel

On the domestic front, rising demand from real estate sector, along with increasing costs of steel scrap, coking coal and the iron ore, made Indian steel companies hike prices.

However, in the short term (June-July), the anti-inflationary measures being planned by the Government may cool down prices. Apart from pressuring the companies to hold on to the price line, the Government may consider scrapping the import duty on steel products to rein in the inflation, according to analysts.

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