Spot prices of steel shot up by Rs 1,500 a tonne in Punjab’s Gobindgarh mandi, India’s largest ferrous metals-selling market yard, in the last two days on news of global production cuts and a sudden spurt in the construction-sector demand.
Currently, steel billet is quoted at Rs 31,000 a tonne while hot-rolled coil (HRC) and sheets are sold at Rs 44,000 a tonne and Rs 43,500 a tonne respectively. Cold-rolled coil and sheets also rose to Rs 48,400 a tonne and Rs 48,500.
Polled mild steel ingot prices at the National Commodity & Derivatives Exchange (NCDEX) also indicate an increase of Rs 870 a tonne to Rs 26,830 a tonne.
However, in the Mumbai spot market, prices remained stagnant with TMT bars, a long steel variety, selling at Rs 30,000 a tonne on Tuesday. Generally, construction demand resumes post-monsoon with orders for completion of existing projects pouring in. Work on new projects also begins.
“Currently, consumers are using inventories they piled up before the monsoon. When their stocks get exhausted, there will be new demand. That would have happened sooner or later,” said Nitin Johri, chief financial officer of Bhushan Steel.
Construction-sector firms store steel for two months of consumption. Therefore, the stocks are likely to run dry by early next month. Then, the demand will be in full swing, he added.
Meanwhile, Sajjan Jindal, vice chairman and managing director of JSW Steel, estimated that steel prices would be revised by the end of this month.
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Anticipating a prolonged effect of the global credit crisis on the domestic construction sector, Indian primary steel producers have cut output by almost 20 per cent.
S C Mathur, head of Cold Rolled Steel Manufacturers Association (CORSMA), considers Gobindgarh as a localised market, which deals with above 90 per cent of total sales in downstream products. Hence, prices increase on small quantity orders and therefore, cannot be considered as a benchmark, he added. The steel sector is likely to stabilise in the next three months, he said.