Sharp dip seen in Indian Steel Futures, corrected by more than 2%

Wednesday, 27 October,

SteelMint Exclusive


Steel long at NCDEX noticed a sharp drop on Wednesday, it opened at Rs 25,000/MT for Oct expiry and went down to Rs 24,520/MT, a decrease by 2 %.

Physical market were deserted as buyers were too hard to find in the market. Buyers are cautious as market remains volatile and uncertain. People say markets are bad and some feel worst is yet to come. Liquidity is the major problem in the market, high input costs, falling steel prices and weak demand has created a liquidity crunch in the market. To an extent, a spurt in Gold, Silver and Sensex has also soaked liquidity from the markets.

Market participants feel that if demand remains weak for next 10 days, market will see another bottom very soon. “We need funds to keep our production intact; delayed payments make it difficult to run our plants efficiently” said an Induction furnace owner based in Raipur.

“Traders and manufacturers are confident that demand will be noticed post Diwali once the construction activities start on full swing. But it will will difficult to say when? “said a trader based in Mumbai.

Falling prices and low volumes keep markets dull on Wednesday. “Situation is bad at this moment for us, but matter of fact is there is no indication of iron ore prices going down. If this situation continues for some more time, we will have to stop production and losses are going to be huge” said an Integrated steel plant owner based in Durgapur, West Bengal.

“There is absolutely no movement in the market; prices will fall more”, claims a local trader based in Rourkela, Orissa.

The question that arises again is – Where are steel prices headed?

We feel prices might correct further and it will depend entirely on real demand coming in especially from construction and infrastructure sector. The correction may range between Rs 500-1,000/MT in near term. Another important analysis is that Chinese import is cheaper compared to domestic HR Coil prices. Domestic steel prices are under immense pressure at this moment and we can see a price cut from major steel manufacturers. This will effect the market as well.

Prices will be range bound till Diwali. We would want to keep a strict wait and watch policy till more concrete positive signals are visible.