Indian steel prices specially longs, fell sharply owing to increased production and subdued demand. Prices have corrected by upto INR 2,000/MT (USD 35/MT) in October’16.
SteelMint tried to find out the reasons for falling prices and results are mentioned below.
According to data maintained by SteelMint it was observed that steel production in India has increased in September against August 2016, Where as steel consumption fell in September that has resulted a rise in inventory levels.
1. Increased Iron Ore Dispatches:
To gauge production we have tried to collate Iron ore/Pellet net dispatches from all the major states (Dispatches + Imports – Exports). It was observed that net dispatches have increased in September by 1 MnT to 8.2 MnT. This can be attributed to end of monsoon season which generally hampers iron ore production by 20-25%.
2. Robust Booking of Imported Scrap by Indian Traders:
It is reported that bulk booking of scrap have been made by Indian traders, for which delivery will be made in October end or November. Traders claim that over 6-9 bulk vessels have been booked from US and Europe at an average price of USD 235-240/MT CFR India.
Although scrap imports recorded a fall of 14.7% to 2.71 lakhs MT in September’16 but it is expected that numbers will increase sharply in October and November’16.
3. Falling Consumption:
Joint Plant Committee (JPC) reports fall in steel consumption by 0.56 MnT. In August 2016 steel consumption was reported at 7.29 MnT, which fell to 6.73 MnT in September 2016. This notifies increase in inventory levels in the market.
To conclude, prices have over corrected and at these levels most of the steel mills are making losses. Considering rising raw material prices, further fall is unexpected.
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