With heavy rains slowing down the pace of construction work in the northern region, steel prices in Punjab have dipped by Rs 700 per tonne in the past one week, giving relief to consumers.
"The demand for steel has come down by 25 per cent because of slackness in construction activity triggered by torrential rains... As a result of it, steel prices have softened a bit," North India Induction Furnace Association President K K Garg said today.
Nearly after a gap of one month, prices of ingot have witnessed fall after touching a peak of Rs. 42,500 per tonne. Now, the prices have come down to a level of Rs 36,800 per tonne from Rs 37,500 per tonnne last week, according to a local steel trader Raj Sood.
Experts said there is a further possibility of decline in steel prices by up to Rs 1,000-2,000 per tonne until the scrap rates fall.
"The scrap rates have not shown signs of softening for the past one week in view of high prices in global market. That is why its rates are prevailing at Rs 30,500 per tonne," a trader said, adding, "if the scrap rates come down it will eventually cause further decline in rates of ingot prices."
With the prices of ingot falling below its finished price of Rs 38,000 per tonne, majority of the induction furnaces in the state have even stopped producing steel, in a bid to cut down mounting losses.
"The cost of making ingot is hovering around Rs 38,000 per tonne, including conversion cost, to furnaces but the lack of demand has pushed down prices the prices below the mark of Rs 38,000 per tonne, resulting into a loss of Rs 1,200 per tonne per day to a furnace unit," a steel analyst said. "Therefore, furnace units have drastically reduced their output to prevent losses," he said.