Domestic wholesale steel prices have seen a hike of 4.5-6.2% from the beginning of the current month. The prices doubled in the last one year.
Industry sources said, with effect from June 1, steelmakers have raised the wholesale price of hot-rolled coils (HRC) by up to Rs 3,000 per tonne taking it to Rs 69,000/tonne in the wholesale Mumbai market. Similarly, the price for cold-rolled coils (CRC) have also been increased by around Rs 5,000 a tonne to Rs 86,000 per tonne.
According to SteelMint, the price of HRC (2.5-8 mm) in the Mumbai wholesale market was Rs 35,900 per tonne in June, 2020. In June last year, CRC was trading at Rs 41,700 per tonne.
Buoyant international prices, which have also risen around the same pace in the last one year as in India, is driving domestic prices upwards. The buoyancy is largely due to less availability of the material in the international market following largest steelmaking nation China’s decision to discourage exports by withdrawing 13% duty rebates on exports. China has also taken a decision to gradually reduce production from the current level on environmental concerns. However, despite the latest round of price hike, landed cost of imported steel will still be ruling at around 10% premium over domestic prices.
“The gap is advantageous to the Indian steel users,” said Ranjan Dhar, chief marketing officer, AMNS India. Sources in the industry said the gap will provide domestic industry a cushion to increase prices further towards the middle of the current month.
The export rebates have reduced Chinese exports in the international markets, which Indian steel players are looking to bridge. With domestic steel prices at a discount to international price, the import risk into Indian domestic market is largely contained. This has also provided optimism to the domestic steelmakers to increase prices.
India was a net exporter of finished steel during the first month of the current fiscal year 2021-22, recording a net trade surplus of 0.59 million tonne in April 2021. During April 2021, steel export from India increased by 121.6% over the same month last year.
ICRA’s Jayanta Roy said despite demand-related concerns in the domestic market because of the ongoing second wave of the pandemic, the latest increase seems to be supported by buoyant international steel prices.
“Given the price differential between domestic and export markets, leading Indian steelmakers would push for higher exports to ensure healthy capacity utilization at their plants going forward,” Roy said.
Domestic consumption of finished steel in April 2021 registered an increase of 516.8% over April 2020, but it declined by 25.7%, month-on-month.
Rohit Sadka, Director, India Ratings said a couple of developments – a rapid increase in the prices of iron ore due to supply shortage and shortage in the supply of steel in the international market due to production cut in China and its withdrawal of the export rebate to local firms – are driving the steel prices up.
However, he said, current prices are not sustainable in the long-term. The pace of price rise might slow down and a volatility can be seen in the near to medium term.
Source : Financial Express
