Friday, February 18,
In an interview with Seshagiri Rao, JSW Steel and Neeraj Singal, Bhusan Steel & Strips, speak about steel prices and give their outlook going forward..*
Q: The markets were speaking about a fall in demand in December and a certain robust improvement in January, how are estimation of the steel demand within the country to grow and therefore want can be the impact on prices?
Rao: Yesterday, the consumption of steel for the calendar year 2010 was released by world steel association. Steel is a global commodity. Therefore, we cannot isolate India and look at. We have to look at world as a whole. The global steel demand has gone up by 13% in the year 2010. So, there is a huge revival in the advanced economies and the consumption levels across all the continents in the world.
Last year, the demand has gone up by 9-10% in India. We are seeing the demand coming back from construction, real estate sector. One side, the flat product demand from automobiles, consumer durables and white goods continue to be robust. The other demand for long product is picking up. So that is a positive signs we are seeing.
Also, restocking is happening because steel prices are going up and the raw material prices are expected to be reset at higher levels in the next quarter. Assuming that the prices of steel will go up in the next quarter, there is restocking which is happening in a big way across the industry. So, all this put together, we are seeing a huge amount of demand in the market place.
Q: We have some data to say that steel output also in January 2011 hit all time highs, it stood at 5.9 million tonne. So, if supply is matching demand which it would because there is still a lot of unutilised capacity. What is the scope for any increases in price? Even if the raw material prices increase, how much will steel makers be able to pass it on?
Rao: What is relevant to note is imports are also falling. If you see upto December, the total imports into India was 5.8 million tonne of steel. Every month we are importing almost close to 8 lakh tonne of steel, but it is coming down because international prices are higher than the domestic prices. The imports into India from overseas are falling. That’s why you find the local demand is increasing, local production is increasing to meet the growing demand and imports are falling.
Domestic prices are at lowest level today relatively to what is happening in the international markets. Particularly, if I see the US, where the HR coil price is close to USD 1,000, it is inching up towards that, domestic Chinese prices are going up, European prices are going up. So, all this put together, the imports would further fall as far as Indian markets are concerned, domestic production will go to match the increasing demand in India.
Q: There is quite a bit of difference that exists now between domestic prices and both Chinese prices and even European prices for that matter. For how long do you see that difference sustaining?
Singal: Presently, the international prices are around USD 880-890, which was till January 12th about in the range of USD 700-720. As the announcements have been made by the major producers like Arcelor and all that, April prices would be around USD 900. Presently, our Indian price of hot rolled coil (HR coil) is about in the range of USD 760-780. So, there is definitely a scope of a increase in price may be in March, if not March then definitely in April.
Part of it is coming not only because of the input cost. The coking coal prices are still high and they are not likely to be coming down and iron ore prices are also touching all time high about USD 190. Our Indian steel prices are very well aligned with the global prices. So, if the Indian prices don’t increase then the producers will have no other option, but to export in the international market.
On the other hand, if the prices are inline then the imports will happen. So, we are virtually operating at the level of international prices how it moves. It may be a lag of one month or so in terms of the pricing, but finally it comes to the same level.
Source: CNBC TV
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