Mumbai: Economic thinktank Centre for Monitoring Indian Economy has said that with the expected dip in contract prices of iron ore and coal, steel prices are like to fall by 3-5% by September.

“We expect domestic steel prices to dip by around 3-5% across product categories in the next three months ended September 2009,” CMIE said in its monthly review of the Indian economy.

The domestic prices of steel is already 7-8% higher than global prices which is indicative of the fact that the prices are yet to be bottomed out domestically, it said.

CMIE also views that the uptrend in international prices seen in June might not sustain due to overcapacity in the global steel industry and that the domestic steel prices move in tandem with international prices.

“While the prices will remain weak, the revival in steel demand will sustain in 2009-10, driven by healthy demand for long steel products used in construction and the expected pick-up in housing construction in the second half of the year,” CMIE said.

Coupled with the commissioning of 4.8 million tonnes of fresh capacity, the revival of demand would accelerate country’s steel production growth to 6.5% from an estimated one per cent rise in 2008-09.