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Primary producers may cut steel prices by Rs 500-700 a tonne for December on falling raw material and finished goods prices in the domestic market and subdued price trend overseas.
Normally, primary steel producers follow the price trend in the spot market. Steel products have become cheaper by upto Rs 500–700 a tonne for longs and Rs 200-250 a tonne for flats so far this month on the spot market following global cues.
Global steel prices have continued to reel under the dual threat of imports from China and weakness in domestic demand, instigating global producers to cut prices in order to safeguard market share.
Steel CIS prices witnessed the highest decline, falling over 4% to $475 a tonne as of Monday. China cold rolled coil prices fell by $10 to $465 a tonne today.
Steel CIS prices witnessed the highest decline, falling over 4% to $475 a tonne as of Monday. China cold rolled coil prices fell by $10 to $465 a tonne today.
“We normally follow the global price trend. Any kind of drastic price movement in overseas market has similar repercussions in domestic markets as well. We are yet to take a final decision in terms of steel prices, though,” said Sesharigi Rao, Joint Managing Director and Group Chief Financial Officer, JSW Steel.
Prices of raw materials have been declining continuously. Iron ore continued its downward trend on lower demand as China indicated pollution driven steel production curtailments. Ore prices for 62% of Fe and 58% of Fe grade were lower at $75.1 a tonne and $63.6 a tonne respectively, a decline of $4 and $2 in November respectively.
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Price movement($/tonne)
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| Particulars | 30-Oct | 24-Nov | Variations (%) |
| Iron ore 62% Fe | 79.8 | 70.42 | (-)11.75 |
| Iron ore 58% Fe | 65.5 | 61.21 | (-)6.55 |
| Premium coking coal | 111.9 | 112.27 | 0.22 |
| Steel CIS black sea exports | 502.5 | 475 | (-)5.47 |
| China HR coil | 475 | 465 | (-)2.11 |
| Source : Bloomberg | |||
Global iron ore prices are likely to remain soft on the back of increased supply from the big three producers and weak demand from China. In India, iron ore prices have also fallen, with the public sector NMDC cutting its prices by Rs 200 a tonne for domestic steel mills.
Usually, domestic steel producers raise their product prices in January in anticipation of seasonal demand from construction and infrastructure sectors till the monsoon rains begin. But, steel demand has remained low this year and is expected to remain subdued in the upcoming season due to a slowdown in economic growth.
“Therefore, the seasonality factor is unlikely to help producers raise prices this year. Instead, they will have to cut steel prices in coming months,” said Goutam Chakraborty, an analyst with Emkay Global Financial Services.
Indian primary steel producers have urged the government to protect the domestic industry from Chinese dumping by increasing the differential duty between scrap and finished steel. With 2.5% import duty on scrap and 7.5% on finished steel, the differential duty works out to just 5%, the lowest in ASEAN countries. Steel mills have written to Prime Minister Narendra Modi to raise import duty on steel to safeguard domestic producers. Steel and Mines Minister Narendra Singh Tomar hinted recently that the final decision may be taken in the next few days.
Meanwhile, India’s steel import has jumped 33% to 4.19 million tonne between April–September 2014, with China contributing 1.34 million tonne, a rise of 108% from the same period a year ago. If the trend continues, total steel imports in the financial year ending March 31, 2015 could nearly double to 9 million tonne.
World Steel had expected India’s steel demand to rise 3.4% to 76.2 million tonne in 2014, after a growth of 1.8% in 2013. Structural reforms and improving confidence will support a further 6% growth in 2015, the agency had said.
