Business Standard

Steel regains shine as inventories dip

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Ishita Ayan Dutt Kolkata

Prices of some select steel products have moved up in the last fortnight as a result of a decline in their inventory level. With freight rates inching up, the industry is cautiously optimistic as indicators point to a demand pick-up early next year.

Prices of ferrochrome, a raw material for stainless steel production, have moved up from Rs 40,000 to Rs 45,000 a tonne in the last 15 days. The rise in prices is clearly reflected in stainless steel rates.

Arvind Parakh, director (strategy and business development), Jindal Stainless, said, utensil-grade stainless steel has moved up by Rs 2-3 a kg to Rs 51 a kg. “There is a slight firming up of prices largely because of production cuts across the globe. International steel producers have cut production by 20-40 per cent, resulting in prices of raw materials and finished goods stablising,” he said.

 

Companies are consuming inventories at a frenzy because the cost of carrying them is too high. Parakh added, “The stock level at stockists, service centres and at the customers’ end is at its lowest.”

“Nobody has stocks,” said Ankit Miglani, director (commercial), Uttam Galva Steels, one of the largest manufacturers and exporters of cold-rolled and galvanised steel from western India.

According to Miglani, global prices have bottomed out. From peak levels of $1,200 a tonne hot-rolled coil prices are now at $600 a tonne. “A revival in the international market is likely once the holiday season is over and domestic prices will be higher than international prices, given that hot-rolled coil imports are banned now,” said Miglani.

India has put hot-rolled coil imports in the restricted list, which means only actual users can import the material.

There are some concrete indicators to suggest a demand revival. Miglani said freight rates last week for a vessel booked from India to China was $3.5 a tonne and this week, it was $8 a tonne. Incidentally, the vessel was shipping iron ore.

R K Sharma, secretary general, Federation of Indian Mineral Industries (Fimi) corroborated that in the last 10 days, there has a been a pick-up in quantity shipped from China.

Prices of iron ore fines, consequently, moved up from $50 to $58 a tonne. International reports indicated that iron ore stocks at Chinese ports had started falling and they were 3 million tonnes lower than those in mid-November.

Scrap, a raw material for steel-making, has also seen some appreciation in prices, moving up from $150 to $250 a tonne since the last month.

Seshargiri Rao, director (finance), JSW Steel, said some positive feedback had come in December. “Order enquiries were coming in and December inventories will be lower than those in November.”

However, Rao does not see an immediate revival. “It will be another quarter before normalcy comes back in the flat steel sector. Flat steel is mostly used in auto and consumer durables sectors.

Rao pointed out that long product (used in construction) manufacturers were doing much better as government project orders were robust.

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First Published: Dec 14 2008 | 12:00 AM IST

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