Steel prices set to decline, but only temporarily

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In a reversal of the recent trend, steel prices are set to be revised downwards over the next few days. After an increase by around Rs 2,000 a tonne over the past two months, an adjustment of Rs 500-1,000 a tonne is likely, with retrospective effect from April 1.

“There will be a correction downwards, but to what extent we haven’t decided as yet. We will have a better picture over the next couple of days,” said Jayant Acharya, director, commercial and marketing, JSW Steel.

Bhushan Steel would decide tomorrow, but the market would not be able to absorb any more increase, said managing director Neeraj Singal. The move would be in line with the global trend. Shagang Steel, the biggest private producer in China, has announced a cut of around $23 a tonne in hot rolled coil, the benchmark for steel prices, spurred by a weak market. In the domestic market, HRC prices were at Rs 37,000 a tonne.

The dip, however, is expected to be shortlived. “The April-June quarter is normally when there is likely to be an inventory correction,” said Acharya.

Though steel prices are subdued for now, raw material prices are not. The spot price of iron ore is now around $172 a tonne, compared to $160 a tonne in early February. India’s largest iron ore producer, NMDC, which supplies to most domestic steel companies that do not have captive mines, has announced a provisional increase of 10 per cent for the quarter beginning April.

“Raw material prices are not in line with steel prices. In the past two-three weeks, steel prices have taken a dip,” Acharya said.

More, steel companies are in the process of negotiating coking coal contracts for the new quarter. These are likely to be $320-330 a tonne, around 47 per cent over the previous quarter. Steel industry representatives said both, the high raw material and subdued steel prices, were likely to get corrected in the near term. “A review of prices could happen as early as mid-April,” a domestic producer said.

Prices of long product and semi-finished steel prices—primarily used in the construction sector—for instance, have seen an increase of Rs 500-600 a tonne. Secondary producers expect another bout of increase this month. The increase is in anticipation of a revival in construction activities as the new financial year kicks in.

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