Steel mills to roll over product prices for July
Primary steel producers in India are likely to roll over their products’ prices for July despite sustained increase in raw material prices continued to squeeze their margins over the last few months.
Steel prices have declined nearly 20 per cent in the last three months due to weak demand and the trend is forecast to continue during the ongoing monsoon season following slow infrastructure and construction activities, mills are unwilling to take a risk for an upward price revision despite increased profit margins pressure.
While iron ore prices have jumped by a staggering 36 per cent in three months and 13 per cent in June alone to trade currently at $112 a tonne in the international markets, Coking coal and hot rolled cold prices posted a decline of upto 22 per cent.
“Iron ore prices have jumped sharply in the last few months resulting into pressure on our profit margins. But, looking at the weak demand from the construction and infrastructure sector during the ongoing monsoon season, we would be rolling over our products’ prices for July. The situation, however, would be clear by the first week of July,” said a senior official of a leading steel mill.
Steel prices poled by the Indian Commodity Exchange (ICEX) reported a decline of 19 per cent in the last three months to trade currently at ~30,000 a tonne now from ~37,000 a tonne in February this year. Producers like JSW Steel are, however, working on the demand of specific products to take a final on price revision.
“Squeezing margins due to continuous increase in raw
materials prices call for an upward revision in steel prices. Coking coal prices remained up for quite some time now, iron ore prices have also jumped significantly in June. But, steel demand has been weak nowadays. Hence, we may look in the price revision on specific products depending upon their demand,” said Jayant Acharya, chief financial officer, JSW Steel.
The government owned NMDC kept its iron ore prices unchanged for July at ~3,100 a tonne and ~2,860 a tonne of lump and fines respectively.
“The steel prices have remained at a pressure globally because the Chinese production has increased, and
amidst trade war the fear of global slowdown has resulted in lower consumption. In India, the demand has remained sluggish and fear of dumping has also led to correction in steel prices,” Kunal Shah, head of commodity research, Nirmal Bang Security.
“Owing to overall economic slowdown and lack of liquidity in the market, there is a fall in steel demand of from construction sector, consumer durables and automotive industries etc resulting into a steep fall in the products’ prices. In such scenario, futures trading provides a good opportunity to hedge against fall in prices,” said Kalpesh Sanghvi, a city based steel trader.