India’s domestic steel demand not a doom and gloom story: Keith Tan, S&P Global Commodity Insights

New Delhi, April 29

While steel price outlook in ongoing year remain “rather dim” on demand slowdown and expected production cuts in China – the largest producer of steel globally, India’s story is “not as doom and gloom”, says Keith Tan, Associate Director, Asia Metals Pricing, S&P Global Commodity Insights.

As domestic consumption remains intact in India - on the back of 2024 being an election year and there being added thrust on infra and public spending , its export markets are increasingly coming under pressure.

“The spin-over effect of Chinese steel price slowing down is being mirrored in some-other regional markets like Korea and Vietnam, which have seen prices fall drastically. And it is also pulling down global prices,” he told businessline.

The China factor

According to Tan, post removal of restrictions, demand in China has not picked up on expected lines.

Moreover, there are discussions on production cuts – or China retaining steel production at 2022 levels – in order to bring down emission levels. All this has impacted steel prices in China, which continue to retreat across recent sessions.

As per trade data available, in China, the benchmark Shanghai rebar futures ended at Yuan 3946 a tonne, earlier this week; around 9 per cent lower from its peak of Yuan 4,328 in March.

China produces over 50 per cent of the world’s steel and consumes over 70 per cent of global sea-borne iron ore.

India outlook

“In India, the situation is not as doom and gloom; and prices have been range bound,” Tan said pointing out that export markets continue to be a challenge for Indian mills.

Mills had a good run in early 2022 when prices in Europe were quite high. But the trade route has dried up due to poor demand and competitive pricing.

“Eastward (to south-east Asia) or westward (Europe) exporting is now a challenge (for Indian mills). I think people are all looking for what’s happening in China,” he said.

Raw material price

In terms of raw material price movements, less demand in China will lead to drop in iron ore and coking coal prices across the world; which in turn will make it difficult for Indian steel-makers to continue on with the existing price range – either for exports or in domestic markets.

Iron ore and coking coal prices are already softening; and an El Nino effect globally would mean near normalcy in supplies from places like Australia (coking coal supplies from there had previously been hit by cyclones and other extreme weather conditions leading to price rise). So the cheer of Indian steel-mills, could be short-lived.

“Prices in India remain amongst the highest globally if you compare them regionally. But in terms of outlook, its a double edged sword. A strong domestic demand likely, while softening raw material prices are a reality. So this would mean mills could come from pressure from end-user industries to reduce prices,” he said.

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