NMDC cuts rates; steel firms roll over prices in September
With domestic demand playing catch up and iron ore prices on the mend, steel companies have rolled over prices for the month.
Three of the top steel producers said prices for the month had been rolled over. Steel demand in the domestic market was impacted by the second wave of Covid-19, which reflected in a price correction in July.
There were price increases in August in the global and domestic markets on the back of a cut in steel supply in China.
On the raw material side, NMDC, the country’s largest iron ore producer, reduced prices by around ~1,000 a tonne. The company informed the stock exchanges on Monday about the revised prices.
Slide from peak
Steel prices have been coming off their highs from June levels when hot rolled coil (HRC) – a benchmark for flat steel – touched ~71,000 a tonne. Flat steel is typically used in automobiles and domestic appliances. A major producer said that currently HRC prices were around ~67,000 a tonne.
According to CRISIL Research, long steel prices have seen a drop of 3-4 per cent (August 2021 versus June 2021) compared to 2-3 per cent in flat steel rates. Long steel is typically used in construction and railways.
Domestic iron ore prices have fallen by 6 per cent in August 2021 over June 2021. With the ~1,000 per tonne drop in July 2021, iron ore prices would have seen a fall of 21 per cent in early September over June 2021, according to CRISIL Research.
Factors impacting prices
The recent correction in the market, seen for flat steel, has been due to three key reasons: Fall in global steel prices, correcting domestic iron ore prices and weak domestic demand, said Isha Chaudhary, director at CRISIL Research.
But international rates are still much higher than domestic prices and the gap is widening.
“Domestic HRC prices are at a discount of ~7,000-8,000 a tonne to export price parity and ~11,00014,000 a tonne compared to import price parity. Despite this, we are focusing on ensuring stability in the market rather than going ahead with a price hike so that consumption picks up fully,” said Ranjan Dhar, chief marketing officer, Arcelormittal Nippon Steel India (AM/NS India).
Dhar added, “For the first time, we need to make a distinction between demand and consumption. For instance, there is high demand in the auto segment, but consumption is not picking up as
production is impacted due to semiconductor shortage.”
Overall, there is demand from infrastructure, construction and auto segments, he said, though rural demand was impacted by lower monsoon.
“It is improving month-onmonth,” Dhar, however, added.
Going forward
A major steel producer said that prices could increase in October with festive sales kicking in.
“We foresee flat steel prices to rise by 48-50 per cent in financial year 2022 with a 26-28 per cent rise in long steel prices. Large steelmakers will see margin expansion of 550-650 bps on healthy top line growth,” said Chaudhary.
That expectation is even as global coking coal prices (a major raw material for steel) have risen by over 30-35 per cent in August 2021 over June 2021 on supply disruptions in the international market.
A cut in Chinese steel production in the second half is expected to be a major factor in providing support to global demand and supply as well as prices.