Posted on 08 Jul 2021
Supported by easing steel supply and normalising economic conditions, global steel prices are likely to tone down during the second half of 2021, says CARE Ratings.
The global market witnessed a 15% year-on-year increase in steel output during the first half of 2021, led majorly by steel giants China and India, owing to post relaxation of lockdowns and strong market demand, the ratings agency says in a report read by Kallanish.
Amid lockdowns and pandemic slowdown, global steel prices have soared, largely driven by demand-supply mismatch, which was the result of a sharp rebound in demand. Steel mills not only struggled to anticipate the sudden spike in demand but also grappled with supply-side logistics in the sourcing of key raw materials.
The Indian steel market witnessed a decline in demand owing to the second wave of Covid-19, but is expected to bounce back post monsoon, largely driven by demand from the infrastructure and construction sector.
Domestic steel offers are currently hovering around a short-term marginal discount to global prices as domestic steelmakers believe any further increase in prices may hamper current sales volumes. This discount is likely to disappear after international prices correct.
Large Indian integrated steelmakers should continue to benefit from the export market owing to the cost advantage gained by low domestic iron ore prices and competitive advantage from China’s low export volumes.
Source:Kallanish
