Steel prices dip by Rs 200-250 on slack construction demand

Steel prices have declined by Rs 200-250 per tonne across the board since October 1 in Mumbai with the slackening of demand from the construction industry.

The construction activities in Mumbai start in the first week of November and, therefore, demand for steel starts coming in around the same time.

With this revision, steel ingot prices are quoting at around Rs 19,000 per tonne. Plates and hot-rolled (HR) coils are quoting in the range of Rs 28,000-28,500 per tonne, while cold-rolled (CR) coils are quoting in the range of Rs 33,000-34,000 per tonne.

Steel demand from railways, road, public works department and housing construction industries has gone down drastically as there has been a sort of a halt of infrastructure development during the rainy season.

"Heavy downpour, followed by floods, destroyed infrastructure of various forms including roads and rails. Besides, lots of residential complexes need urgent restructuring to survive floods in future. Therefore, construction activities would peak up after the rains subside. Demand for steel is bound to go up, which in turn, will ultimately translate into a rise in prices," D R Gupta, director of a leading trader in Mumbai, Soorajmull Baijnath Ltd, said.

Meanwhile, margins for steel traders are squeezing because of rising raw material prices and processing costs.

"Till last year, we used to do business at a margin of Rs 500 per tonne, but now we are forced to sell at a margin of Rs 250, as the trade has now become volume-based from price-based earlier," Gupta said, adding that "we do not want a customer to go without trading, as no one knows whether he would come back or not."

Prices of raw materials such as iron ore, pig iron, sponge iron, dolomite and coking coal are surging by the day, as there has been an uninterrupted expansion activity in steel production across the globe.

Besides, rising electricity supply charges are also contributing towards squeezing of margins.