After two months' resistance, steel prices rise again in Feb on cost push

Companies discuss special pricing for MSME customers with government

After a pushback in December and January, steel prices are on the rise again. Both flat and long product prices have seen an increase over the last one month.

According to data from SteelMint, prices of hot rolled coil – a benchmark for flat steel stood at Rs 66,500-67,500 a tonne in February ex-Mumbai, compared to Rs 64,500-65,650 at the end of January. The increase in long products is more; prices of rebars by secondary producers stood at Rs 56,300 a tonne in February compared to Rs 52,400 at the end of January.

Companies say, it’s a combination of demand recovery globally and severe cost push.

From January 1 to now, the cost is up by almost $130 per tonne of steel internationally, pushed up by all raw materials, from iron ore, coking coal, ferro alloys, refractories to oil, petroleum and gas, said Jayant Acharya, director (commercial & marketing), JSW Steel.

“But steel prices are still behind the curve. Post a price correction in the last two months, steel price has increased by about $60-$100 a tonne in different parts of the world,” he said.

Futures of iron ore traded in China have plunged since Monday after authorities stepped in to check speculative buying, according to reports. But whether it will rein-in prices remains to be seen.

Cost headwinds reflected in the December quarter earnings of almost all major steel companies. “Unless there is a significant recovery in prices, Q4 too will see a similar trend,” said Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel India (AM/NS India).

Demand recovery

In December, demand slowed down leading to a steep correction in prices across the world including India. Apparent domestic steel consumption in December was down by 9.5 per cent year-on-year (YoY). But thereafter, global markets have seen some recovery.

“At one point, domestic prices were at a significant premium to landed cost. Now that has again reversed and domestic prices are at a slight discount,” said ICRA senior vice president, Jayanta Roy.

Acharya said, “In India, seasonal demand is picking up and we see all round improvement – on the infrastructure side, projects are picking up speed, the automotive and consumer durables demand is very good and renewable energy projects are showing traction.”

But it’s early days, as Roy pointed out, the market is still a little shallow as China is just coming back after the holiday season.

Even as prices have started increasing in the domestic market, Dhar said that India is lagging behind. “India needs to follow the price parity,” he said. In Europe, prices of HRC are at around $1,100 a tonne and in the US, higher.

Support for MSMEs

But steel prices have had quite a run touching record levels in the last two years. In November, HRC had scaled back to an all-time high of Rs 72,500 a tonne.

Discussions are on within steel companies and with the government, for a special pricing for MSMEs. Some companies already have preferential pricing for MSMEs. JSW’s Acharya said that the company would continue to support the MSME sector through preferential pricing mechanisms.

While JSW is doing it directly with the MSMEs, AM/NS India has a memorandum of understanding (MoU) with the National Small Industries Corporation (NSIC) which enables MSME customers to avail of special pricing.

PRICE RISE

HRC

End January: Rs 64,500-65,650 a tonne

February: Rs 66,500-67,500 a tonne

Rebars

End January: Rs 52,400 a tonne

February (till 12th): Rs 56,300 a tonne

Source: SteelMint