Dollar weakness, temporary supply constraints contribute to the increase.
Metal prices have had a good run since July this year largely on the back of stimulus packages across the world, while the real demand is still a quarter or two away. Steel, aluminium, copper prices have appreciated 11-21 per cent with steel clocking in the lowest.
Copper, which touched a 13-month high recently, is now hovering around $6,700 a tonne, up from $5,522 a tonne in July, while aluminium is at $1,900 a tonne against the July level of $1,500 a tonne. Steel prices (hot-rolled coil, a benchmark flat product) in the domestic market have moved up from Rs 32,000 to Rs 35,500 a tonne.
Spot prices of raw materials for steel have also gained significantly. Iron ore prices are at $92 a tonne, higher than the $81 a tonne in July while coking coal is at $175-$180 a tonne, higher than the $129 a tonne at the beginning of the year.
| GETTING FIRMER |
| * Steel, aluminium, copper prices have appreciated 11-21 per cent, with steel clocking in the lowest increase |
| * Copper, which touched a 13-month high recently, is now hovering around $6,700 a tonne, up from $5,522 a tonne in July while aluminium is at $1,900 a tonne against the July level of $1,500 a tonne |
| * Iron ore prices are at $92 a tonne, higher than the $81 a tonne in July while coking coal is at $175-$180 a tonne, higher than the $129 a tonne at the beginning of the year |
| * Metal players across the board have labelled the price rise 'artificial' propped up by stimulus packages |
Most of the international prices hold good for the domestic industry, which means that even though demand has recovered in the domestic market it would not reflect in prices.
Coking coal, which accounts for 50 per cent of the raw material cost for steel, is mainly imported. Aluminium prices are determined on the basis of landed cost of imported aluminium and copper prices too are dictated by international trends.
Despite the appreciation, metal players across the board have labeled the price rise ‘artificial’ propped up by stimulus packages. The apprehension is attested by Nobel prize winning economist Paul Krugman, who recently cautioned that world trade was sputtering and the fiscal stimulus packages would soon fade, even as the Reserve Bank of India was understood to be ‘managing the recovery’.
Steel prices have not been hiked since the past two months. “Chinese domestic prices had fallen and prices were driven by the largest producer and consumer. The outlook in the short-term was soft, “ said Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel.
Hindustan Copper sources said the increase was led by the dollar weakness and temporary supply constraints. “Demand has not improved,” said sources.
Sudip Datta, chairman and managing director, Ess Dee Aluminium, said, prices were increasing but so were inventories. At present the inventory level on the London Metal Exchange (LME) was 4.4 million tonnes. Industry representative also pointed out, prices had appreciated but were way below the peak levels of 2008.
Datta said, “We will not see the peak levels of 2008.” He would know as aluminium prices had peaked to $2,800 a tonne in July 2008. Copper was at $8,900 a tonne and steel at $1,200 a tonne. Right now, metal players are waiting with bated breath for the real demand to come back, which they say could be six months away.
