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Falling international steel prices, coupled with subdued demand, have forced major steel makers to roll over steel prices for the month of May.
Last month, most manufacturers had cut the prices of flat products to maintain an edge over available cheaper imports from Japan and Korea. About 5.5 million tonnes flat products were imported last year. Analysts say prices might drop further in the next few months owing to low demand. "The prices will move in the narrow band only, not much increase or decline. Depending upon the infrastructure sector and that too, after June, the prices might change significantly," says a senior official with SAIL.
JSW Steel will maintain prices at the same level for May, says Jayant Acharya, director (marketing). "After sentiments improve and projects get announced, there would be increased steel consumption in the second half of this year, which is expected to change the steel market scenario." Essar Steel, too, will roll over prices for the month of May, according to its spokesperson.
Steel companies had increased prices for the first three months of this year due to rising input costs and rupee depreciation. The increase had happened after a gap of three months due to subdued demand.
The worst time for the steel sector is over now and the sector is on the back of a revival mode, says SAIL chairman C S Verma. "Prices will not go up very high or come down drastically low. The government spending has not been as high as it would be otherwise because of the model code of conduct. We will have to wait and see."
Anjani Agarwal, partner and national leader (metals and mining) at Ernst & Young, says: "Steel companies had managed to pass on the increased costs to the consumers earlier. But in April, the demand did not pick up as expected. And the infrastructure sector is not showing signs of any revival - maybe after election results and the policy push, there will be some improvement."
According to him, there is anxiety among the steel firms that a price increase might not find a good response in the market; so it's better to play with current prices. "There is softening on input costs; so it is possible to hold on to prices without compromising on the margins for a temporary period."Domestic steel production grew 3.9 per cent at 7.25 million tonnes (mt) for March, while across the world it grew 2.7 per cent at 141 mt, according to data from World Steel Organization. Steel consumption grew just 0.7 per cent for the April-February period, according to data from the joint plant committee under the steel ministry.
Even though India produces many flat products, it still needs to import because many specialised products are not yet made here. Only a few years ago did the country star focusing on value-added products for the steel segment, says Agarwal.
Also, due to the rupee depreciation, companies started focusing more on exports. "Imports came down, while there was an increase in exports in the last financial year, which created an equilibrium in the domestic market withregards to supply and demand," adds another person tracking the sector.
Flat steel products are used in industries such as automobile and consumer durables, while long steel products such as thermo-mechanically treated, or TMT, bars and angles are used in the construction sector.
