The outlook for steel sector remains
muted despite a cautious $20 increase in prices globally. Industry executives
say recent purchases by customers are more due to re-stocking and are not
attributed to fresh demand.
“(Steel) prices on an
average have moved up across markets including the US, Europe, China. But this
is more because customers who had low inventories are now buying again. It is
not an indication of a revival in demand,” said Seshagiri Rao, joint
managing director of JSW Steel, India's second-largest steelmaker by capacity.
Steel demand has fallen due to
global slowdown, with customers putting off purchases of the alloy used for
making cars and refrigerators. In India, although sales are rising,
profitability has been impacted due to a rise in prices of iron ore and coking
coal. While availability of iron ore has been hit due to a Supreme
Court-directed suspension of mining in Karnataka, coking coal, which is
entirely imported, has become expensive after the rupee fell 20% from June.
“The outlook for Indian
steel prices remains negative due to weakening demand and global economic
slowdown,” says Sanjay Jain of Motilal Oswal.
“Once rupee reverses the
downtrend, there will be more pressure on prices on the back of cheaper
imports. Prices of raw materials are also in correction phase globally over
past few months, although at a slower pace. They will definitely push prices
further downward if demand does not improve,” he wrote in a recent report.
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