Steel majors cut prices by ~2K in first correction since March

However, companies likely to hike prices again once domestic demand revives

Steel companies have corrected prices by ~1,200-2,000 a tonne in July across flat and long steel products, but there may be scope for an increase, going forward.

Arcelormittal Nippon Steel India (AM/NS India) corrected prices by approximately ~1,500-2,000 a tonne. Jindal Steel & Power (JSPL) sources said there was a reduction in all steel product prices by ~1,500-2,000 a tonne across hot rolled coil (HRC), rebars and other structural products; JSW Steel sources said that prices were corrected by ~1,200-1,800 a tonne.

This is the first correction in prices since mid-march 2021. However, companies believe that this is a temporary correction and once domestic demand is back on track, an increase is likely.

AM/NS India chief marketing officer (CMO), Ranjan Dhar, said, “There is no structural reason for this reduction as import parity is still above even June domestic prices.”

“We are doing this to kick-start domestic demand after the second wave lockdown and support users to revive fast. Prices could also increase, going forward, on the basis of international price movements and demand improvement,” he added.

A major steel producer pointed out that the cost structure had not changed. It said, “Iron ore was still strong and in the last eight weeks, spot coking coal prices (Australia) had moved from $108 a tonne to $199 a tonne.”

According to Steelmint data, fines from Odisha increased from ~9,450 a tonne to ~10,000 a tonne during May 31 to June 28; lump ore prices moved from ~13,750 a tonne to ~14,000 a tonne during the period.

“This correction is temporary and due to Russian intervention. Once the Indian economy opens up, prices are most likely to be revised. On the long product side, for the secondary players, margins were now negative,” the producer said.

After the revision, the price of hot rolled coil (HRC) stands at ~68,500 a tonne (the import price parity is ~77,000 a tonne).

Rebar prices are now at ~45,00051,000 a tonne.

Isha Chaudhary, director, CRISIL Research, also said that despite the recent correction, the gap between global landed and domestic prices continues to remain huge, thereby leading to moderate price cuts.

“We don’t expect any free fall in steel prices due to the green policies being played out. China and Russia’s focus on production cuts is likely to keep global supply tight, thus supporting steel prices,” she said.

The Russian government has proposed a five-month export duty on steel, copper, aluminium and other non-ferrous metals exported outside the Eurasian Economic Union (EAEU), in order to curb prices in the domestic market.

“Export duties on all steel products at the rate of 15 per cent effective August 1, 2021, up to December 31 is on the cards. The base duty rate will be 15 per cent. However, the minimum duty rate per tonne of products has been established. The tax will be charged depending on which rate will be higher,” said Chaudhary.

The recent pressure on prices, in fact, was triggered by the proposed Russian export duty. As JSPL sources said, Russian steel company MMK, in the last four days, flooded the market with 150,000 tonnes of steel, putting pressure on international steel prices.

“Spot global steel prices in Europe dropped by $100 a tonne and China reduced prices by the same quantum, including to Vietnam,” the source added.

Vietnam is also a big customer for Indian players, and hence, domestic players have had to lower prices for export purposes. However, the Russian export duty could augur well for Indian steel companies.

Chaudhary said, “Russia is the second largest exporter of steel with 31.5 million tonnes exported in 2020. With this (export duty), we foresee, further deficit in global steel trade, thereby leading to higher exports from India on higher realisations and weak domestic sales.”

Prior to the recent correction, domestic steel prices surged 1.7x over the last 10 months versus a 2.1x rise in global steel prices.

However, a weak domestic demand led by localised lockdowns in several states coupled with the pressure on global steel prices led to the recent correction.