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Ambarish Mukherjee

New Delhi, April 23 A day after the Prime Minister, Dr Manmohan Singh, urged the steel industry to avoid falling prey to the “temptation of seeking windfall gains from market manipulation in a period of excess demand”, spot prices of steel ingots have come down significantly across the country.

This could directly impact steel used in the construction sector. Steel ingots are used by secondary manufacturers and rerollers for making reinforced TMT bars, sarias and other structurals used in the construction sector.

In Delhi, ingot prices that closed at Rs 30,730 a tonne on Monday, went down to Rs 29,830 at Tuesday’s close and further down to Rs 28,000 on Wednesday, marking a fall of Rs 2,730 a tonne over two days.

In Mumbai, ingot closed at Rs 30,500 on Monday and went down to Rs 30,000 on Tuesday and went down by another Rs 1,000 on Wednesday to finally close at Rs 29,000 today, marking a fall of Rs 1,500 a tonne in the past two days.

The market, however, seems to have factored in a softening of steel prices even before the Prime Minister spoke. Over the past one month, the price differential between futures and spot markets has narrowed down considerably. Futures (bookings for delivery at a future date) are indicative of the perception of buyers as to the likely trend in prices in the coming months.

According to data available from commodity bourses, steel ingot futures prices on the National Commodity & Derivatives Exchange (NCDEX) have come down by 14.58 per cent between March 20 and April 22. Mild steel ingots futures for May (Delhi market) were quoted at Rs 34,260 a tonne on the NCDEX on March 20 when spot prices in Delhi stood at Rs 32,500, marking a price differential of Rs 1,740 a tonne between the futures and spot market prices.

Over the past one month this price differential has come down by 95.97 per cent indicating that current level of spot prices are expected to continue over the next month also.

Ingot May futures for Delhi delivery were quoted at Rs 29,900 a tonne on the NCDEX on April 22 evening when spot prices in Delhi ruled at Rs 29,830. Thus the price differential between futures and spot has come down to Rs 70 a tonne as against Rs 1,740 a tonne a month ago. However, on Wednesday there was a marginal recovery in the futures section that closed at Rs 30,000 and with the fall in spot prices the price differential has again shot up to Rs 2,000 a tonne.

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