'Bullish trends in steel prices are here to stay'

J J Irani, director, TATA Sons, and doyen of steel industry talks to Rajesh Bhayani on the outlook of steel prices, iron ore scenario and steel imports.

Steel prices have been rising in the last few months. How long will the bullish trend last?

I think the bullish trend in the steel prices is going to stay here for a longer period. China is helping steel prices to remain at higher levels by discouraging steel exports from the country.

China needs cheaper steel for use in projects coming up ahead of the Beijing Olympic to be held next year, and discouraging exports will keep the steel prices in the country under control.

The country is also thinking beyond Olympic Games. China is a big producer of steel and the government there, it seems, is thinking that higher international prices are in the overall interest of the sector.

Besides, iron ore prices, an important raw material, are also ruling at higher levels, thus keeping the prices for finished product at higher levels.

Does that mean Indian producers will keep on raising the steel prices?

Producers should keep in mind imports and the strengthening rupee. Currently, the country imports 7-10 million tonnes of steel. However, imports are viable only for projects situated near coastal areas.

What is your projection for steel prices?

I don't see HR coil prices going down below 500-550$ a tonne. The all time high is $700, and $650 levels are in sight. If one looks at the trend, each dip earlier was lower than previous dip and each peak was lower than earlier peak. Situation has now reversed, with dips are higher than previous dips and peaks are higher than previous peaks.

Indian iron ore exporters have also started making money...

India is exporting high-grade iron ore to take quick advantage of the bullish trend. They should, however, export low-grade iron ore more. They should upgrade lower grade ores to higher grade before exporting them. China is doing that and in much larger quantity.

There have to be conscious efforts to upgrade ore by beneficiation before exporting them. It may be less profitable but that is the need of the hour. At present, exporters are just scratching the surface. There is no compliance to environmental discipline. This kind of slaughter mining is not in the interest of the country.

What is the status of the fabricating sector?

Till recently, only 10 per cent of our steel was handled by service centres. Cutting and fabricating was generally done by the users. The trend is changing now. Internationally, 50 per cent of cutting steel sheets to size and fabricating as users want is done by the service centres of the producers.

It is slightly costlier for users but they are showing the preference for that in India too. Intermediaries in the steel sector are now entering the business of fabrication.