Low prices of raw material support Indian steel makers to ripe more profits; steel prices hike will be add on to their margins.

Major raw material (Iron Ore and Coal) prices are dipped, which likely to give better benefits to steel manufacturers during Jan-Mar, 2014.

Lower demand from China, the major raw material importer, has put pressure on raw material prices. Coking Coal prices declined to USD 135-138/MT which is USD 8-10/MT less from last three months. Whereas, Iron ore also trading between USD 128-130/MT which is around USD 3-5/MT down from previous quarter.

JSW’s Joint MD Seshagiri Rao mentioned, “Coking Coal prices have declined by around USD10 /MT which would help steel companies to improve margins during Jan-Mar, 2014.”

Indian steel manufactures will get benefits of lower raw material prices. Indian Iron ore domestic prices have reduced to around 35-37% in Karnataka Auction. Whereas, Coking Coal import also gets cheaper than earlier; this may fetch good margin to the manufactures.

SAIL official also said, “Internationally, Coking Coal prices have declined by around USD 8-9/MT and are likely to benefit steel manufacturers.”

SAIL’S Chairman CS Verma said, “The Indian steel industry is showing a positive upswing in demand and trend is expected to continue in 2014, helped by increased spending on infrastructure.”

In addition to lower raw material cost, primary players of steel industry (i.e. SAIL, JSW and JSPL etc) have raised its prices by INR 750-1,000/MT, which will improve their profits further.

January to March period is used to be peak season for steel companies. So, price increase will help companies to raise their margins.

Domestic steel demand continues to remain weak for sectors like real estate, infrastructure, and automobiles among all others. However, companies are majorly focusing on selling steel overseas, as their lower raw material cost may benefit them.