Source: Business Standard
After consecutive price hikes since July, domestic flat steel producers have paused to roll over prices for October, on the back of softening of prices in China, coupled with a decline in iron ore prices.
In the last fortnight, hot-rolled coil (HRC) prices in China have eased to about $572 a tonne from $588 a tonne. But given that prices have moved up from a level of $448 a tonne in May, producers are viewing this more as a correction.
The significant growth in steel demand within China, coupled with capacity cuts, had kept steel prices at buoyant levels in the past three months. Industry sources said, in anticipation of production cuts during winter months, steel prices had increased and may have already run its course.
According to Icra, Chinese steel production grew at a healthy rate of 5.1 per cent in January to July of this year and kept the global steel capacity utilisation rates above 72 per cent in the past five months, against 68.2 per cent in December 2016.
Prices have, however, taken a hit in the past two weeks. “China’s debt-to-GDP ratio is now one of the highest in the world. So they are now trying to control the debt. This will impact domestic steel consumption, which in turn will impact import of iron ore. Going forward, coking coal prices may also correct since China imports 15-20 million tonnes of coking coal,” Sushim Banerjee, director-general at the Institute for Steel Development and Growth (INSDAG), said.
The correction in Chinese prices partially led domestic steel producers to roll over prices.
HRC prices in the domestic marke are currently ruling at Rs 40,750, up from a level of Rs 36,000 in July.
A steel producer pointed out that apart from a steep increase in international prices, rising costs had also prompted producers to increase prices in the past few months. Coking coal prices had increased from $150 to $208 a tonne. Iron ore, which was hovering around the mid-$50 range, had shot up to $99 a tonne.
However, iron ore prices have slumped in the past fortnight to around $60 a tonne. Public sector miner NMDC has also revised prices downwards by Rs 100 to Rs 2,300 for lump ore, effective from Thursday. A producer said, with royalty, cess and other taxes and transportation, it would work out to be around Rs 4,000 a tonne. But with the weakening of the rupee, it would be cheaper than imports by about Rs 150 a tonne, he said.