Steel price hikes, investments signal industry revival2 min read . Updated: 27 Dec 2013, 12:24 AM IST
JSW to raise prices by `700-1,000 per tonne in January amid pick-up in demand as Tata, Jindal seek to expand capacity
Mumbai:JSW Steel Ltd is raising prices by 2% in January and Tata Steel Ltd wants to keep making investments in India amid an improvement in its South-East Asian operations—early signs of a recovery in the demand for steel.
“I would say we are cautiously optimistic, but yes, the direction is better," Jayant Acharya, director, commercial and marketing, JSW, said on Thursday. “If this continues post elections and if GDP (gross domestic product) growth is at 5-6% (in 2014-15), then we (India’s demand) would grow faster than that."
JSW, the third largest Indian steelmaker with a capacity of 14.3 million tonnes (mt), is hiking prices by ₹ 700-1,000 per tonne (2%) in January to pass on some of its rising costs. There are also signs of higher domestic demand in a few segments.
Acharya said iron-ore, coke and scrap steel prices are up and also, based on high diesel prices, freight rates are up. Globally, there is some restocking demand and the US is doing well.
“We continue to invest in building new facilities and capabilities as we are bullish about the long-term growth prospects of our country," T.V. Narendran, Tata Steel’s managing director for India and South-East Asia, said in a year-end statement to the media. “Our South-East Asian operations continue to improve."
Narendran said the company opened up new market segments such as small and medium enterprises this year and leveraged existing customer and distribution networks, growing by 10-12% over last year, “which is much better than the market" average.
Tata Steel’s combined capacity in India and Europe stands at 28 mt, the largest for an Indian company.
A spokesperson from fifth largest steelmaker Jindal Steel and Power Ltd said in the next two months new capacities are being commissioned that are set to more than double the existing 3.5 mt capacity by March 2014.
The sentiment for steelmakers has improved with the trends in the consuming sectors, an analyst said.
“International scrap prices are up and the US, Korean and Taiwan steel companies are doing well. In the domestic market, some auto companies have announced they are raising prices and construction companies have told us they are raising prices, too," said Prakash Duvvuri, head of research at metal and mining information website OreTeam.
“This is giving some room to steel companies to raise their own prices and lift their margins in the January to March busy period, and the market is expected to take the hike because of the improving market sentiment."
JSW’s Acharya said some new segments had emerged that are promising higher sales to the company.
“On the domestic side, rural and agriculture-led demand has started improving," Acharya said. “Also, there are projects such as pipeline projects that are coming in and export-based manufacturing demand has picked steam in the last few months."
Rural and agriculture sector demand is largely for retail applications such as steel roofs and trunks, farm equipment and silos. The export-based manufacturers are small industries exporting processed steel and also automobile components.
Investments in capacity expansions are on track in anticipation of higher upcoming demand.
“We have completed the 3 mt expansion in Jamshedpur, taking our capacity in Jamshedpur to 10 mt and should commission the first phase of our 6 mt steel plant in Kalinganagar in Odisha towards the end of the next financial year," Narendran said.