Key players say market has bottomed out, hike also driven by higher iron ore, scrap costs
Steel companies have increased prices by about Rs 2,000 a tonne during the past 10 days, on the back of an increase in domestic demand and international prices, taking it to near-pre-Covid levels.
There have been two rounds of increase since the end of July. Industry sources said, in the two rounds that have happened, prices have increased by about Rs 2,000 a tonne.
Jindal Steel & Power Ltd (JSPL) managing director, V R Sharma, said that the market had bottomed out. “There have been two increases since the end of July. In the last two weeks, pellet and iron ore prices have both increased by about $10 a tonne and scrap prices by $25-$30 a tonne, he added.
So higher input cost is an additional factor driving prices.
Industry sources pointed out after the latest round of increase in August, prices would be lower from March levels by about Rs 1,000 a tonne.
JSW Steel director-commercial & marketing, Jayant Acharya, said, “The gap between international domestic price was 7-8 per cent. Over July and August, we have been able to cover 6 per cent. But we are still below international prices. Imports of hot rolled coil (HRC) from China are at $500-510 a tonne and domestic prices are still below that level.”
“Prices in the domestic market are increasing because there is a demand pull and internationally prices have gone up. Incrementally, we are getting back to shape,” he added.
HRC prices reported a steady fall from Rs 38,000 a tonne to Rs 34,750 in June a tonne due to weak demand.
However, since July prices started moving up.
A producer explained that there was high export order load and mills were not operating at full capacity with most of the major producers at 80-90 per cent capacity. “So, supply-side adjustments were also happening while demand was also coming back,” he pointed out.
Global demand was mostly driven by China where recovery started ahead of other countries. International prices were now at January-levels, said one of the producers.
Except for China, most countries reported a decline in production for the month of June. According to World Steel Association (WSA) figures, China produced 91.6 million tonne of crude steel in June 2020, an increase of 4.5 per cent compared to June 2019. In comparison, India’s production was down by 26.3 per cent, Japan 36.3 per cent, South Korea 14.3 per cent, Germany 27.3 per cent, Italy 13 per cent, while France and Spain were down by 34.9 per cent and 31.5 per cent, respectively. The United States produced 4.7 million tonnes of crude, which was a decrease of 34.5 per cent compared to June 2019.
Jayanta Roy, senior vice president ICRA, however, pointed out that despite the growth over months, domestic demand remains quite fragile, and was down by over 40 per cent in June in year on year terms.
“Near term demand outlook too remains weak, given the onset of monsoon, which will slow down the pace of execution of construction and infrastructure projects. Such projects are key to the growth of domestic demand to the pre-Covid levels. However, given the strategy of corporate sectors to conserve cash in the prevailing challenging environment, and tightness in the government’s fiscal position, it is not certain to what extent new projects will commence in the near term. Demand from the automobile sector too is unlikely to provide much support,” he said.
- Domestic hot rolled coil (HRC) prices moved up by Rs 2,000 a tonne from end-July
- China’s HRC export prices rebounded to $500-510 a tonne after remaining subdued at about $422 a tonne during Q1
- Pellet, iron ore and scrap prices also up $10-$30 in the last 15 days