Fall in demand to choke rising steel prices

Our Bureau Mumbai | Updated on May 28, 2021

However, the strong export demand and higher international prices would enable steel producers to increase export levels, said India Ratings

The soaring steel prices may finally face a headwind with the sharp fall in demand from user industry due to Covid induced restrictions. Finished steel consumption last month was down 23 per cent at 6.78 million tonne compared to March. Steel consumption is likely fall in June quarter when compared with the March quarter.

However, year-on-year, it will still be higher as there was complete lockdown across the country in last June quarter. The second wave is likely to impact auto and consumer durable demand and partially delay construction and infrastructure activities.

“However, the strong export demand and higher international prices would enable steel producers to increase export levels, although high freight and shipping costs and container availability could be the areas of concern,” said India Ratings.

Also read: Steel production, consumption down by over 20% in April

Domestic hot rolled coil prices increased three per cent m-o-m and 78 per cent y-o-y in mid-May to ₹65,250 a tonne. Similarly, domestic rebar prices increased ₹3,000 a tonne m-o-m to ₹56,000 a tonne in May. Steel prices increased due to higher export orders, leading to a lower supply within the trade segment, strong global demand and high international steel and iron ore prices.

“However, domestic demand is likely to be subdued due to the lockdowns and increased infection rates, thereby impacting auto and consumer durable demand,” it said.

Chinese impact

The fall in Chinese future prices over the last week could partially impact India’s export orders and domestic prices over the near term. “Considering the Chinese government’s effort in checking prices of steel and lower demand expectation due to the lockdown, domestic and international prices are likely to face headwinds, but would remain higher than pre-Covid levels,” said the rating agency.

Crude steel output in April was down 17 per cent m-o-m at 8.3 mt as steel companies diverted oxygen for medical purposes.

China’s crude steel output was up 13 per cent year-on-year in April at 98 mt on higher consumer demand. The higher output was despite government’s efforts to reduce annual output and curb carbon emissions. China’s industrial production grew 9.8 per cent in April.

Published on May 28, 2021

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