Wednesday, June 29,
Manufacturers for steel products are a worried lot these days, with demand for finished products falling because monsoon has left the manufacturers in a spot of bother. RBI is continuing to focus on bringing the inflation down to more acceptable levels of 6.5%, and to achieve that target it is increasing interest rates every month, thereby making funds more costly for the industry. In last 10 meetings the central bank has increased interest rates by 250bps. More over the recent hike in diesel cost has only eroded the margin as the hike in transportation cost cannot be passed on to the consumers.
The margins for the Re-bar industry has shrunk to unsustainably low levels, if we look at the difference in Ingot prices and TMT (12mm) for the Raipur market the difference has shrunk to Rs 2,500/MT from the previous comfort levels of Rs3,200/MT. Few manufacturers say that selling at such low margins will cannot sustain as at these prices mean that they are actually bleeding money.
One of the leading manufacturer of TMT in the region said that “We were running on only 50% of the installed capacity and are not even able to sell 30% of the produce. Buyers are negotiating like never before. Frankly it will be better for us to reduce the production even from these levels instead of selling TMT at such huge loss”
For Hyderabad market producers are expecting TMT prices to grind lower to Rs 31,000/MT as Ingot have corrected today. The major problem in market is not the price but lack of buyer’s participation. Prices have become irrelevant as buyers are not coming forward to buy Re-bar.
In Mandi Gobindgarh the condition is not different; manufacturers across all the categories are finding it difficult to sustain business. Rolling mills are not buying ingot as they are not able to pass on the production and there’s no point in keeping stock piles in the monsoon season. Ingot is offered at Rs 30,000/MT in the market but the rolling mills are expecting the prices to fall further and ingot will come down to Rs 29,000/MT. But Ingot manufacturers believe the prices will not fall below these levels and they see Rs 30,000/MT as the base level for ingot.
As per the manufacturers the steel prices in India have bottomed out and there’s no room for further price corrections during the monsoon season.
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