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Domestic steel prices at record-high levels
China’s $550 bn stimulus to revive its economy has led to a mismatch between supply and demand, and raised steel prices
Domestic steel prices have touched a record high, adding to cost pressures on automobile and consumer durable makers at a time when demand is starting to rebound from the impact of the pandemic.
Prices of hot rolled coil (HRC)—a key indicator of the price trend in flat steel—have risen to their highest-ever of ₹58,000/tonne on average as major steel players recalibrated their dealer prices, according to a report on Thursday by Edelweiss Securities.
Flat steel consumers such as auto and consumer durable manufacturers have already announced price increases to offset higher input costs. Prices of passenger vehicles, commercial vehicles and farm equipment are likely to increase 1-4% this month while that of consumer appliances such as televisions, refrigerators and washing machines could rise by as much as 10%.
Industry bodies representing these sectors, medium and small enterprises, and Union minister Nitin Gadkari had complained to the Prime Minister’s Office in December on the repeated increases in steel prices, which is affecting production, consumer demand and implementation of infrastructure projects.
Steel producers increased prices at regular intervals in the past 15 weeks. Local steel prices move in tandem with the global average, which is influenced by Chinese demand.
The Chinese government’s $550 billion stimulus to revive its economy has swelled the nation’s appetite for steel at a time when steel exporting nations such as Japan and South Korea have curtailed production. This mismatch in demand and supply has sent global steel prices rocketing.
“We are quite bullish on steel prices for the next two quarters. Raw material prices have been on the increase for the last several months. Prices of iron ore, a principle raw material for the steel industry, has increased by over 100% in the last few months,” Pankaj Malhan, CEO, ESL Steel Ltd, said.
“We expect steel prices to increase further in the coming months till issues related to raw material shortage and prices are addressed.”
While domestic steelmakers ensure prices stay below the cost of imported steel, the recent price hike saw domestic steel at a 6% premium to the imports from South Korea and on a par with China for the first time since April.
However, given the lead time for imports stretches well into the June quarter, steelmakers are confident that imports won’t threaten domestic sales.
“Domestic HRC prices rose by a further ₹2,750/tonne (5%) compared to previous week as major producers calibrated their notified prices with wholesale ones. As a result, steel dealers also increased prices to preserve their margins,” Edelweiss Securities said in a report.
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First Published:7 Jan 2021, 10:03 AM IST
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