Analysts feel that there is still headroom for companies to raise prices, despite a sharp rise in domestic steel rates over the past six months. Realisations for Indian firms will, therefore, continue to improve
MUMBAI: For domestic steel manufacturers, the going has been good for a while now. Not only demand remains favourable, steel prices have also been north bound providing a supportive environment.
China, the largest consumer of the commodity, is facing supply curbs which bode well for demand and prices, globally. Limited exports out of China, as Beijing targets zero emissions over time, will lower the risks of cheap steel imports into India and will likely boost capacity utilisations across domestic steel manufacturers.
“Chinese supply restrictions and ex-China capital starvations have finally set the stage for capacity shortfalls in steel," say analysts at Ambit Capital Private Limited. “The Chinese steel costs curve is likely to increase on supply restrictions, a higher share of EAF output (20% by CY25 from 12% in CY20) and higher power tariff."
Analysts feel that there is still headroom for companies to raise prices, despite a sharp rise in domestic steel rates over the past six months. Realisations for Indian firms will, therefore, continue to improve.
While markets appear to be expecting a correction, steel prices continue to move higher, point out analysts at JP Morgan Asia Pacific Research. They said landed prices are in the range of Rs72,000-75,000 per tonne, higher than the domestic price of Rs59,000 a tonne.
As better realisations accrue higher benefits, capacity utilisations should also improve in India. Fresh capacities, however, are sometime away.
JSW Steel has commenced production from its new 5 mtpa hot strip mill facility at its Dolvi Works while Jindal Steel and Power Limited has also completed expansions.
With rising steel prices, integrated steel manufacturers such as Tata Steel Ltd will reap benefits.