Comments
The sharp rally in domestic steel prices may come to a halt with the increasing number of coronavirus (Covid-19) cases being reported in India.
Steel companies have announced a price hike of ₹500-₹750 a tonne on hot-rolled coil (HRC) prices in March despite a weak trend globally. In fact, despite moderate domestic demand, steel prices have seen an uptrend since last November in line with international trends.
However, the rally may come under pressure in the near term due to the Covid-19 outbreak.
After touching a low of ₹32,250 a tonne last November, domestic HRC prices have hit ₹37,000, implying an increase of 15 per cent in the last three months. However, the domestic steel demand growth remained low at 3.8 per cent in the first 10 months of this fiscal, against 7.5 per cent in the previous-year period.
China’s export prices
After touching a high of $496 a tonne in January, China’s export HRC prices have fallen 6 per cent since mid-January following the coronavirus outbreak.
Jayanta Roy, Senior Vice-President, Corporate Sector Ratings, ICRA, said domestic steel prices are currently trading at a discount of 7 per cent to the landed cost from China and at a discount of 3 per cent to the landed cost from Japan.
While this provides headroom to domestic steelmakers to increase prices, the rising number of confirmed cases of coronavirus in India remains a concern. Along with continuing macroeconomic headwinds, this could affect domestic steel consumption and pressurise steel prices in the coming months, he added.
ICRA has revised its steel demand estimate to 5 per cent for the next fiscal, against its earlier estimate of 6.5 per cent.
Fresh export opportunity
India remained a net steel exporter with a 40 per cent increase in shipments so far this fiscal, while imports declined 8.5 per cent. The combined share of China, Korea and Japan in India’s steel imports stood at about 73 per cent.
However, given the risk of delayed deliveries due to bottlenecks in production and port handling capacities, India’s steel imports are likely to remain low in the coming months.
On the other hand, barring Italy, which accounted for about 10 per cent of India’s total steel exports, none of the other steel export destinations for Indian mills have seen a serious impact of Covid-19 so far. This presents opportunities for Indian mills to increase market share from the space left open by steelmakers in China, Korea and Japan.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.