Steel prices are expected to dip by another 10 per cent by the first half of the next financial year on falling demand caused by temporary suspension of many infrastructure projects. This is contrary to the expectation that the price decline seen between July and September 2008 will reverse soon.
A recent report by BNP Paribas says that hot rolled steel (HRC) prices are likely to fall to the quarterly average level of $700 per tonne in the first quarter of 2009-10 from the current imported price of $780 a tonne.
The report says prices could even touch $650 a tonne. However, prices could move up after that as infrastructure companies would begin re-stocking at this level to complete the ongoing projects and commence new ones.
BNP estimates the average HRC to hover around $750 a tonne in the second and third quarters of the next financial year and $800 per tonne by the end of the fourth quarter.
A significant driver of the drop in steel prices lately has been the surplus in China. An oversupply in China and the CIS region has led to a billet-price drop from $1200 a tonne to $600.
Spot HRC in China is currently quoted even at $600 per tonne while contract rates are slightly above $700 . A weak demand and consequent oversupply in the domestic market has caused both China and CIS to export steel with prices close to their marginal cost of production. China HRC free on board (fob) price is $600 a tonne and CIS billet prices are $600.
In India, imported HRC is being quoted in the range of $750-800 per tonne. Inventory stocking by middlemen that happened in the last 3-4 months has created further pressure on pricing. Buyers, anticipating prices to soften further, are delaying restocking.
Due to a continuous decline in global steel prices, domestic producers recently announced a cut between Rs 2,000-4,000 a tonne and a further cut of at least Rs 3,500 a tonne cannot be ruled out because of a sustained fall in global demand. Post-cut, leading producers continued to sell steel above Rs 38,000 a tonne. Analysts estimate steel prices to bottom out to Rs 32,000 a tonne by the end of the current financial year.
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rebar
Sep’07
Global steel pricing has come off globally on the back of weak demand in China, United States and Europe. In India, steel demand growth has dropped from double digit levels in the last five years to 7 per cent due to weak demand from construction and a overall credit crunch that has curtailed purchases.
