Steel prices in India may fall by Rs 1,000 per tn in July

NEW DELHI (Commodity Online): India’s domestic steel prices may come down by Rs 1,000 a tonne in July due to sluggish demand mainly from the construction and infrastructure space.

According to steel secretary Atul Chaturvedi, in July, steel prices are likely to fall by Rs 1,000 a tonne mainly due to lack of demand from infrastructure firms amid the monsoon season.

Domestic steel makers are yet to announce any price changes of their products. High cost of raw material, fall in demand and cheaper global rates are putting pressure on domestic steel prices and analysts say the trend could well hit the margins of domestic companies in the current quarter.

The July-September period will see erosion of profitability of steel companies as the gloomy demand scenario would prevent them from hiking rates amid high input cost pressure. He described the second quarter as the weakest link for the industry in the current fiscal.

Steel firms have seen prices coming down by up to Rs 6,000 a tonne to around Rs 27,000-33,000 a tonne in past few months as construction work slowed down ahead of monsoon.

Prices of raw material, coking coal and iron ore, are at present ruling around 50-100 per cent high. Spot iron ore prices are ruling at around USD 100-115 a tonne and coking coal prices at around USD 185 a tonne level.

Anticipating a hit on their bottomline, steel makers like Tata Steel, Essar Steel and JSW Steel are looking at increasing price in some segments in the current month.

Tata Steel, the world’s sixth largest steel producer, hinted at increasing the prices of steel. The company said the rise in the input costs would be passed on to the customers.

Globally, raw material prices have gone up. If producers don’t pass on the price increase, their margins will be affected. We are hoping that we’ll pass on the increase in raw material cost.

Though the demand for steel both in the domestic and international markets is growing, the cheap imports from China, which has overcapacity, continues to be a challenge for Indian firms.

Tata Steel said there are positive trends in the international markets such as the U.S. and Europe. China has overcapacity and we anticipate that the cheap imports will continue. It will have an impact on the domestic market.

Recently, the state-run National Mineral Development Corporation (NMDC) has increased the prices of iron ore by 11 per cent based on the international market trends. The company has indicated that prices would be revised on a quarterly basis.