Domestic steel prices have moved up by Rs 750-1,000 a tonne for flat products and Rs 1,250-1,750 for long products, from the start of the New Year. This is due to increase in price of metallurgical coke (met coke) as a result of the rupee depreciation against the dollar.

Though prices of steel have increased, demand is still subdued and there is no visibility for any improvement in January, say experts.

Odisha is facing a shortage of iron ore due to the state government's crackdown on illegal mining. The state accounts for 40 per cent of domestic iron ore production. This, in turn has led to closure of many sponge iron units and to a continuous rise in prices of iron ore, pig iron and sponge iron, say those in the trade.

The current prices of iron files and lumps are Rs 2,800-3,000 per tonne and Rs 5,500 – 6,000 per tonne, up Rs 150 – 200 per tonne over the last 10 days.

The current sponge iron price is Rs. 23,500- 24,000 per tonne, up by Rs 1,000 – 2,000 per tonne in the last month.

Integrated steel plants with captive power will benefit from this, say analysts. Market-men said steel stocks such as SAIL, Tata Steel, JSW and JSPL have already started moving up in the last one month

They also point out that secondary steel producers have not been able to increase prices. First, they could not increase prices due to lack of demand and then the rapid depreciation of the rupee ensured that met coke prices rose, and this could not be passed on to the customer.

Steel traders said that buyers were holding lesser inventory than before. Those who stocked up for 60 days were now stocking only for 30, those who did for 30 were buying stocks only for 10 days and those holding for a fortnight were picking up only a week's requirement and finally those who stocked for a week were buying stocks that would last only for three days.

Steel traders say that global steel prices for flat products were 15 – 20 per cent lower than in India.

“Large steel producers promptly jack up prices as soon as international prices go up but do not do so when the converse happens,” said a Bhiwani- based steel trader Mr Arun Agarwal.

This pricing policy has ensured that exports of value-added products such as steel pipes have become uncompetitive, say analysts tracking steel sector.

Analysts concur that large Indian steel companies as a thumb rule, keep steel prices higher by at least Rs. 400 per tonne, compared to the landed cost of imports.

If the difference between landed cost of steel and domestic price is Rs 500 per tonne, then it becomes unviable for steel traders to import and hence domestic players jack up prices promptly.

If the same difference is Rs. 2,000 per tonne or above, imports become viable for traders and force domestic producers to cut prices.

raghavendrarao.k@thehindu.co.in

Related Topics
comment COMMENT NOW