Steel prices may not change next quarter; festival demand key

Steel prices may not change next quarter; festival demand key

New Delhi: Steel prices in the July-September period may remain the same as in the current quarter, with raw material costs continuing to bite, but festival demand afterwards will determine whether consumers will pay higher prices, Tata Steel Ltd executives said on Tuesday.

“Coal remains at a similar level. So if we want to maintain the same margins we need to roll over the prices (to the next quarter)," managing director H.M. Nerurkar told reporters.

Steel prices have remained firm this year in India as coking coal and iron ore prices, ingredients that constitute as much as 70% of the total cost of steel making, have remained high, prompting steel makers to raise prices despite high interest rates slowing consumer demand.

Loading video...

Prices of TMT steel bars of 8mm thickness from Steel Authority of India Ltd in Kolkata were quoted at 47,000 per tonne in April, up 8.3% from 43,400 in January, the company’s website showed.

The key factor for steel prices will be festival season demand in October, said Koushik Chatterjee, Tata Steel group financial officer. “That is when we will see if the market is supporting the prices."

He didn’t elaborate on whether steel firms would raise prices if festival demand is robust.

Nerurkar said interest rate increases—10 times since March 2010—have hurt demand, mainly in the consumer goods sector, but there was still a chance it may rebound.

“To some extent, it’s the consumables like automobiles and other things that depend a lot on loans (where demand has been hurt)," Nerurkar said. “That’s the initial shock. After some time, people do get used to a particular thing and they start to take it in their stride."

He said the construction sector had also taken a hit, but government spending on infrastructure was supporting it.

In case demand remains slack even in the festival season, steel firms may have to trim production, he said.

“If the market does not support (demand), if there is a glut, the situation will be different," he said. “If there is a big slowdown, marginal players, who have the highest costs, will trim down production. Nobody would want to make losses."

All in all, demand growth for steel is seen touching double digits.

“We are a developing country. As long as we have a GDP (gross domestic product) growth of 7-8%, steel demand will grow by 9-11%," he said.

There was an urgent need to develop more greenfield plants and boost India’s steel production to more than the current 70 million tonnes, which would be aided by the government’s planned “ultra mega" plants, the executives said.