Indian pipe mills have raised the list price of electric resistance welding (ERW) pipes by INR 500/t on 21st Jan 2021 on account of limited supplies in HRC leading to a second price hike for Jan ’21 deliveries, SteelMint came to learn from market sources.
The effective trade offer by India’s largest structural steel tubes manufacturer, APL Apollo Tubes Limited, for base grade ERW pipes (25-125 NB, 2.2-8 mm thickness) is assessed at INR 62,250/t (exy-Mumbai), INR 60,000/t (exy-Raipur), and INR 62,000/t (exy-Delhi). Prices do not include GST @ 18%.
Factors behind the price hike:
1.Price hike in HRC puts pressure on traders-SteelMint learned from its market participants that the second hike announced by major steel mills didn’t get absorbed, hovering at around INR 56,500-57,000/t (exy-Mumbai). On contrary to this, major steel mills are planning to increase domestic flat steel prices by around INR 1000-1500/t in the near term. Trade sources are of the view that a further price hike will be difficult to absorb since traders have lowered their procurement levels.
2.Government Initiatives on the Infrastructure front-It is expected that the demand from the infrastructure sector may be driven from roads, metro projects and railways. Large-scale irrigation projects too provide robust support, especially in South and West regions. The deferral of capital investments in the past two years will provide a low base for support. Also, demand from this sector is expected to be propelled by 8-10% growth in FY’21 led by the National Infrastructure Investment Pipeline (NIP). Under NIP, the Government has an outlay of 111 lakh crore, of which 42% of the investments are under construction phase and 36% are in the pre-construction phase (on the lookout for funds).
3.Demand from Real Estate-This segment accounts for 35-40% of steel demand and is expected to rise 5-6% between FY21-FY25 led by a pick-up in affordable housing. Disbursements of loans from housing finance companies and wholesale non-banking financial companies (NBFCs) to the real estate sector have picked up towards the end of CY’20 and the outlook for CY’21 remains positive due to healthy demand. For instance, the new housing scheme of the DDA, with nearly 1,350 flats was on offer and received a healthy response in Jan ’21.
What may happen in Feb ’21?
A major pipe distributor based in Delhi said,”Major Indian pipe mills are planning to announce a price reduction by around INR 1,000-2,000/t by Feb ’21, considering the sharp decline in domestic HRC prices”.
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