New Delhi: Steel prices would come under pressure in futures market and may slip by 10% if government brings the alloy under Essential Commodities Act, analysts said.
In last one year, prices of steel have surged by over 70% in the futures market.
“If steel is brought back again under Essential Commodities Act (ECA), prices may come down by 10%,” commodity brokerage firm SMC managing director D K Aggarwal said.
Market sentiments in the futures market would also be affected by the move, he said.
Karvy Comtrade Research Head Harish G said, “There will not be any direct impact on futures trading in steel, but prices would definitely come under pressure”.
“It would create a kind of panic selling in the market,” he said.
Both spot as well as futures prices of steel in the country’s leading commodity bourses NCDEX and MCX have seen a whopping 73% increase in the last one year. Currently, price of steel for April delivery is ruling at Rs31,840 a tonne, while a year ago it was Rs18,462 per tonne.
Steel Minister Ram Vilas Paswan has written a letter to Prime Minister Manmohan Singh suggesting various fiscal and non-fiscal measures, including putting steel back into the ECA.
Steel was de-listed from the ECA last year as the price situation was under control.
“But with prices spiralling high and demand-supply mismatch shooting up by nearly 10%, we need to ensure that the sector contributes effectively in containing inflation,” a senior Steel Ministry official said.
In the letter Paswan said that the three months since December 2007 have seen steel prices rising by 20% to 24%. Possibilities of setting up a regulatory mechanism for steel and its inputs, and re-classifying steel as an essential commodity may be considered, he added.
Market experts attributed the rising inputs costs -- iron ore and cooking coal -- for the surge. Both iron ore and coking coal prices have shot up more than 100% in the last one year.
Global prices of iron ore increased to $142 per tonne this year as against $84 per tonne last year. Coking coal went up to $140 a tonne from $60 a tonne.