Economy

Domestic steel prices to come under pressure

Our Bureau Mumbai | Updated on February 05, 2021

Steel prices increased in Jan to a record high of ₹58,000 a tonne   -  istock.com/ozgurdonmaz

Imports from China are now 10% cheaper

The cut in import duty is expected to exert pressure of steel companies to reduce domestic prices. To protect the interests of the end-user industries of steel, the Budget announced a reduction in custom duty on flat steel products to 7.5 per cent from 12.5 per cent and on long products to 7.5 per cent from 10 per cent.

Resistance

Steel prices was increased in January to a record high of ₹58,000 a tonne and was rolled back to ₹56,000 a tonne due to strong resistance from the end-user industries. The duty reduction on steel products would make their imports more competitive and in turn exert near-term pricing pressures on domestic steelmakers, said ICRA in a statement.

Domestic hot-rolled coil prices witnessed a steep rise of about 54 per cent from ₹36,250 a tonne since last June on back of strong recovery in the domestic demand and increase in international steel prices.

‘Won’t affect imports’

Jayanta Roy, Senior Vice-President, ICRA said the reduction in duties will not affect imports from countries like South Korea and Japan, with which India has a Free Trade Agreement. However, imports from China and other non-FTA countries would become more cost-competitive now.

At the current duty structure, Chinese export HRC prices are at 10 per cent discount to domestic prices. Considering the lead time of about two months for the imports to arrive at the Indian shores, domestic HRC prices could correct by up to 10 per cent by March-end, he said.

ICRA, however, expects domestic steel demand to remain favourable on the back of several positive announcements made in the Budget. This in turn is likely to keep domestic steel prices buoyant unless the international prices correct significantly from the current levels. Domestic steel consumption would receive a boost from the GoI’s continued thrust on infrastructure with a 26 per cent higher capital outlay.

Published on February 05, 2021

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