Key highlights:
- Steel manufacturers announce a second price hike in Jan’21
- Supply constraints and robust demand continue to persist
- Domestic trade prices started to soften
Steel manufacturers have announced a second hike in flat steel prices by up to INR 1,000-2,000/t on account of limited supplies and higher international prices. At the beginning of the month, mills had announced a substantial increase in flat steel prices by around INR 2,000-2,500/t
Effective (exy – Mumbai) prices by major steel mills:
- SAIL is offering HRC at INR 55,500-55,800/t and CRC at INR 64,500-65,000/t
- AM/NS India is offering HRC at INR 56,500-56,900/t and CRC at INR 66,250-66,750/t
Prices do not include GST @ 18%
Factors driving the price hike:
1.Acute domestic shortage of iron ore
Iron-ore prices have shot up by as much as 50% since March ‘20 thereby putting pressure on Indian steel prices. The rise in prices has not escaped the government’s eye either. At a recent industry conference, Transport Minister Nitin Gadkari said that he had drawn Prime Minister Narendra Modi’s attention to a 55% hike in steel prices in the past six months.
2.Double Digit growth in Auto Sales
According to the Federation of Automobile Dealers Associations (FADA), total sales across auto categories increased 11.01 % to18, 44,143 units last month compared to 16, 61,245 units in Dec’19. Two-wheeler sales increased 11.88% to 14, 24,620 units last month, as compared to 12, 73,318 units in Dec’19. Tractor sales, also, grew by 35.49% to 69,105 units last month, against 51,004 units in the same month of 2019.
3.Strong Demand from White Goods sector
“The white goods market has been witnessing a steady return towards normalcy. We expect this demand to be high in the coming few months as well, owing to an increased need for automation of household chores due to the work-from-home culture.” said Pradeep Bakshi, MD & CEO, Voltas Limited.“With agricultural income being good this year, we expect those markets to pick up momentum in Q4 FY’21,” said Kamal Nandi, Business Head, Godrej Appliances.
4.High international prices-
Major Chinese steel mills are offering HRC at around $710-720/t FoB on higher domestic prices and strong futures. The Japanese and South Korean mills continue to offer HRC around $770/t FoB basis on limited export allocations. Meanwhile, the Indian mill is offering HRC at $840-850/t CFR Europe. This prompted Indian steel mills to keep Indian prices higher.
Trade sentiments started to soften
Few trade participants shared with SteelMint that trade price corrected by INR 500-1000/t as the buying sentiments started to soften. Traders are reluctant to buy at higher prices.As per SteelMint’s benchmark price assessment, domestic HRC prices stand at INR 56,500-58,500/t and CRC prices at INR 68,000-69,000/t (exy-Mumbai). The prices mentioned are basic and GST @18% is applicable.
Will the price levels sustain?
Clearly, steel and iron-ore dynamics are hurting India and it’s becoming difficult for the end user to absorb this price hike. The realization of the country’s mining and metals production will require a coordinated effort from all the players. In other words, a win-win blueprint by policymakers is the crying need of the hour.
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