Tepid demand drives down steel prices

Steel prices are on the wane. Prices of long and semi-finished products have slipped by Rs 2,500-3,000 per tonne, while those of billets and ingots have fallen by Rs 3,000 per tonne.

Industry sources said though steel companies have not officially brought down the prices, the markets were driving down the rates.

They added that the markets were not able to absorb the recent price hikes by some producers, given the current level of demand and signs of price undercutting. Some steel makers had hiked prices by as much as Rs 4,000 per tonne last month.

Fabricators said prices of ingots in the open market have slid by more than Rs 5,000 per tonne. "The price hikes by big producers was irrational and a correction had to happen."

Frenetic buying in the long-products segment, which saw an upsurge in the prices, had been arrested due to the lacklustre demand from the construction sector.

Industry sources said prices of sponge iron have come down from Rs 11,000 per tonne to Rs 10,000 per tonne.

They added that some of the new-generation entrepreneurs, who were planning to come out with new sponge iron units in the eastern region, were reviewing the situation.

However, industry representatives expected flat-product prices to remain stable, even though supply was more than the demand.

"We expect that the credit limit which was freezed in China for major steel projects will be eased after July 15," said a source.

"Moreover, China Iron and Steel Association had also forecast a net import of 40 million tonne this year."

But, accroding to domestic steel producers, even if the Chinese market does not recover, the Indian steel industry is well covered. They added that the Europe and US markets were emerging as major export destinations and prices in these markets were more lucrative than those in China.

Meanwhile, prices of hot-rolled coils are at $580 per tonne in Europe, and in the US they are hovering around $650 per tonne.

"The Chinese market is witnessing a slowdown, but we are bullish about Europe and the US markets," sources said.

Sources also said the supply in the flat-products segment was greater than the demand, but the surplus was being exported.

They added that the domestic steel producers were not dependent on the Chinese market since the warning to curb exports, which had exceeded the threshold limit of three per cent. "In the last four months, hardly any material has been sent to the Chinese market," they said.