Steel producers likely to raise prices in August, albeit marginally

Slight uptick in demand, huge gap between domestic and global prices could drive the decision

steel, factory
Representational image (Photo: Reuters)
Aditi Divekar Mumbai
3 min read Last Updated : Jul 30 2021 | 11:53 PM IST
With demand slightly picking up and domestic steel prices continuing to stay at huge discounts to global rates, primary steel producers may be prompted to raise product prices for August.

“We are raising prices by Rs 1,000-2,000 a tonne from August 1 as there is a slight uptick in demand. Also, domestic steel prices are at huge discounts to overseas steel rates,” Ranjan Dhar, chief marketing officer at AM/NS India told Business Standard.

AM/NS India is a flat steel producer along with Sajjan Jindal-led JSW Steel and Tata Steel in the domestic market. Naveen Jindal-led Jindal Steel & Power (JSPL) and state-owned Steel Authority of India (SAIL), on the other hand, are long steel players.

“We are yet to take a call on pricing for August,” said a JSW Steel source close to the development.

Flat steel products are used in the auto industry, while long steel finds wide application in the infrastructure and construction segment.

For July, steel producers had reduced prices by around Rs 3,000 per tonne in response to slacking demand in the domestic market.

A pent up demand perhaps is prompting players to resume the northward revision in prices for August, said industry officials.

“For JSPL, we will wait for NMDC and OMC to decide on their pricing and then take a call. If iron ore price increases or ore prices are unchanged, we will pass on a partial price hike of at least 50 per cent (Rs 1,500 per tonne) onto the customers. If the ore suppliers lower prices then there will be no change at our end,” said V.R. Sharma, managing director of Delhi-based Jindal Steel & Power.

The consumer industry, on the other hand, remains unperturbed despite a likely increase in price in a scenario where project execution remains slightly dull due to ongoing monsoon season, which is typically a slack season for the engineering industry.

“Steel companies have been trying to increase prices for the last few months but eventually roll back as the market does not have any appetite to absorb it due to weak demand. Month of August may not be any different,” said Vimal Kejriwal, managing director and chief executive officer at KEC International.

Larsen & Toubro, another large consumer of steel and cement, in its recent earnings conference call mentioned that rise in steel prices have been a concern for the company and that the management remains engaged with steel players to work around pricing for products given that the former is a long-term customer for most steel producers.

“Even though steel producers may raise prices, it will not be in the same quantum of Rs 3,000-3,500 per tonne like earlier as there is a strong mismatch of demand-supply in the market. Also, the secondary steel producers which went missing in the first quarter of FY22 due to shortage of industrial oxygen are back in the market. Due to this, supply side is intact and demand is feeble,” said Kejriwal.

Domestic steel prices since the last few months, due to continuous price hikes, had reached close to Rs 50,000 per tonne from about Rs 36,000 per tonne in December.

Between flat and long steel products, the former does stand some chance for hike in prices as the auto industry could be in a position to absorb it but for long products large price hikes are difficult given the demand scenario in the current seasonally weak quarter.

Topics :steelSteel producerssteel demand

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