Yuan devaluation to weigh on steel prices

Suresh P Iyengar | | Updated on: Dec 06, 2021


May put pressure on Indian firms to reduce price

The devaluation of the Chinese yuan will put pressure on steel prices and push up imports despite the Government hiking import duty by 2.5 per cent to 7.5 per cent. Seshagiri Rao MVS, Joint Managing Director and CFO, JSW Steel, told Business Line that after dumping steel for long China is now exporting its worries to other countries as it dropped a bomb on the entire commodity sector with the devaluation of yuan.

Though China will have competitive advantage in the short run, the impact on emerging markets would get adjusted and there may be pressure on Indian steel companies to revise prices downwards, he said.

Rao said the Chinese companies are losing $40-50 on export of every tonne to India and they can afford to bear it as most of the steel companies there are government-owned. Steel companies in China get bank funding at 0-1 per cent and there is no pressure of repayment schedule.

Imports to touch 15 mt

Of the monthly one million tonne steel imported into India, China shipments account for 30 per cent. Imports are up 50 per cent to 2.54 million tonnes (mt) in the June quarter. Going by the 61 per cent rise in shipments in July, the total imports this fiscal would be 15 mt against 12 mt forecast earlier, he said.

It is really worrying that imports, which would account for 20 per cent of the total annual India demand of 77-80 mt, will decide the pricing of the remaining 80 per cent of steel sold in the country, he said.

On the need for compulsory Bureau of Indian Standard for foreign companies to tap into Indian market, Rao said when the Indian companies are made to register separately with each countries that they are exporting what is harm if the foreign companies take BIS registration to ensure quality.

“A major portion of steel imported here is of secondary defective coils and are dumped at a very low price,” he said.

With the expected fall in steel prices, Rao said customers are cautious and postponing their fresh orders to avoid holding high cost inventory.

Published on August 14, 2015
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