Steel companies hike prices after 4 months
Costs have risen globally in line with increase in iron ore prices
Taking cues from the global market, domestic primary steel producers have raised prices of the commodity by ~750 per tonne from February 1. This is the first hike since October 2018.
“Domestic steel prices were in the range of ~42,000-44,000 per tonne, depending on various products. The price hike across products is about ~750 per tonne,” said a JSW Steel source close to the development. Jindal Steel and Power, Tata Steel, Rashtriya Ispat Nigam, and Steel Authority of India (SAIL) are among other primary steel producers.
Globally, steel prices have risen on account of rise in iron ore prices — a key raw material used in the making of steel. The $40-per-tonne hike in global steel prices has prompted domestic producers to raise prices in India, even as local iron ore prices remain weak compared to global ore. The global steel price trend is also firm, due to declining production in China.
“We have a bullish outlook on domestic steel prices for at least the next six months, as the global trend is positive and there is strong demand for steel in the domestic market,” informed Seshagiri Rao, joint managing director and group chief financial officer of JSW Steel, at the earnings conference on Wednesday.
Iron ore prices rose in international markets after an accident in Brazil, one of the major exporters. The global industry expects the demand to rise from next week onwards, which will support a positive price outlook for the industry.
In India, the scenario is different. Over the last five months, miners including state-owned NMDC have been reducing prices. NMDC had cut prices by 30 per cent since October. Domestic iron ore miners in Chhattisgarh will see their leases coming to an end next year and hence are trying to extract as much ore as possible. This has led to a surplus in the market, putting pressure on domestic prices.
Meanwhile, rating agency Icra said that supply from Brazil has been hit on account of the tailing dam collapse in one of the mines there, and safety measures are expected to be more stringent at Brazilian mines going ahead. However, there is sufficient iron ore available in India and is likely to ensure that ore prices do not inch up in the near term.
Domestic supplies will exceed demand by around 25 million tonnes (mt) and the situation is unlikely to change materially in FY20, when most of the merchant mining leases expire.
The total ore requirement in India for FY19 is 201.2 mt, while the estimated domestic iron ore production is 210 mt with imports at 15.7 mt. This leaves the country with a 24.5-mt surplus during the year. Increased production in Odisha during the fiscal will more than offset the production loss in Goa due to regulatory issues, said the Icra report.
Excess supply is also reflected from the fact that NMDC, despite suspension of its Donimalai mine in Karnataka, effected price cuts to the tune of ~950 per tonne for iron ore fines and ~1,250 per tonne for iron ore lumps since November, from its mines in Chhattisgarh.