Steel prices may bounce back in third quarter: Assocham

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Our Bureau

New Delhi, Aug. 3

STEEL prices are expected to bounce back from the third quarter of this fiscal on the back of the US economic recovery, the large infrastructure build-up in West Asia and strong growth prospects in the Indian economy, according to the Associated Chambers of Commerce and Industry's (Assocham) Eco Pulse Study.

Globally, steel prices have declined by $150-200 per tonne over the last quarter. This can be attributed to poor economic activities in the European Union (EU) and also the piling up inventories by the US since September 2004. Such an over-supply situation has resulted from a slack in demand for steel in Europe, especially from France, Germany and Italy. Global steel companies such as Mittal Steel, ThyssenKrupp and Arcelor have reduced their steel production owing to the inventory build-up, the study says.

Besides this, domestic imports are on an upward trend. Imports rose by over 20 per cent in the first quarter of the current financial year as compared to the year-ago period. Such an increase in imports can be attributed to competitive pricing by countries such as Ukraine and Russia. "Slackening demand and over-stocking in certain countries, coupled with cheap domestic imports, led to the erosion in steel prices," according to the Assocham President, Mr Mahendra K. Sanghi.

Steel prices in the country have eroded by around 16 per cent during June-July 2005. All domestic steel producers, except Tata Steel, reduced their prices in June in the range of Rs 500-2,000 per tonne. In July, Tata Steel, Essar Steel and Ispat Industries slashed prices of steel products in the range of 5-8 per cent.

In spite of the recent spate of price reductions, the future still holds promise for the domestic steel industry. According to the International Iron and Steel Institute, world crude steel production (of 62 countries) increased by 5.2 per cent to 89.7 million tonnes in June 2005 as compared to the corresponding month last year. With the demand for steel expected to remain buoyant, many domestic firms have gone ahead with their expansion plans. As the economies of South-East Asia and West Asia are growing, the Indian steel industry is poised for a strong growth.

(This article was published in the Business Line print edition dated August 4, 2005)
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