Bokaro Steel Plant (BSL) of the Steel Authority of India Ltd (SAIL) is presently exporting HR coils for $220 on FOB basis as against $300 till April this year. It is likely that with the declining trend in export prices of HR products, which is the basic input for any flat product, indigenous HR producers might be compelled to divert a large proportion of their production to the domestic market thereby aggravating the surplus scenario.
With the domestic market yet to show signs of demand growth in terms of higher demand from the infrastructure sector like power, ports, fertiliser and petrochemicals, signs of supply outstripping demand growth are prominent.
During April-May 2000, the growth in the capital goods sector which happens to be one of the most steel intensive sector was to the tune of 0.6 per cent against 11.4 per cent in the corresponding period last year.
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However, B K Singh, managing director, BSL said the plant, which set a HR export target of 4.5 lakh tonne has no plans of curbing exports immediately. Singh optimistically said, "We are hoping that prices go up post-September." Bokaro has already exported 1.2 lakh tonne.
The dropping of prices is most evident in the US sheets market where all sheet products have fallen by US$ 5-20 per tonne. Over the last month, increasing production, imports and high inventories have all contributed to the price reduction.
Sheet prices, seem to be losing momentum in the Asian market as well. This would have a major impact on the level of international prices in the coming months.
Moreover, defectives have also flooded the market. With respect to HR coils, cold rolled (CR) coils, electrical steel and tinplates, the defective component of imports have soared to 60 per cent as compared to 25 per cent in 1998-99. Continuous inflow of cheap imports of seconds and defectives have further lent to the downward pressure on domestic prices.
Earlier this year, HR producers increased their export target by 74. 1 per cent to 2.4 million tonne as compared to 1.4 million tonne last year. Production has also been hiked to 9.1 million tonne.