The northward movement of the steel costs remains unabated, with the price touching an all-time higher of Rs 58,000 per tonne (ex-Mumbai) for benchmark hot-rolled coil (HRC) item. This is amid constrained provide and choose-up in demand from building, automotive and white goods sectors.
“Domestic HRC prices rose by a further Rs 2,750/tonne compared to previous week as major producers calibrated their notified prices with wholesale ones. As a result, steel dealers also increased prices to preserve their margins,” brokerage firm Edelweiss mentioned in a report on January 6.
According to SteelMint, as on January 1, 2021, the cost of 2.5-8 mm HRC in the Mumbai wholesale industry was Rs 55,250 a tonne the cost hike effected from January 5 took the wholesale cost to Rs 58,000 a tonne. Rating agency Icra’s Jayanta Roy mentioned HRC costs have been by no means greater in the domestic industry. “It is unprecedented,” he mentioned.
On January 1, 2020, the cost for identical grade of HRC in the Mumbai wholesale industry was Rs 37,500 per tonne. The existing cost is greater by 55%.
“At current level, domestic prices are at 6% premium to imports from South Korea, but we do not envisage threat from imports as lead times are well into Q2CY21. That said, the price momentum could cease if Chinese export price continues to remain weak,” mentioned Edelweiss.
Credit Suisse also expects steel costs to stay elevated on demand recovery, shortage of steel and substantial price push.
Supply constraint in the domestic industry is due to the dual impact of subdued production by the secondary producers and restricted imports. The mixture of the two has also brought down steel mills’ inventory to 10.6 MT in December, a 21% year-on-year fall.
Secondary steel producers, primarily for want of raw material, are making significantly significantly less. In December, their share in the domestic production was just 36% compared with the typical typical of about 42%. Credit Suisse mentioned with a choose-up in finish demand, secondary steel producers are anticipated to ramp up their capacity utilisation.
Domestic steelmakers have been facing flak from diverse quarters that involve MSME and road transport and highways minister Nitin Gadakri for jacking up costs exorbitantly more than the final handful of months. While Gadkari wrote to the Prime Minister in search of intervention at the highest-level to rein in the increasing costs, Indian Steel Association (ISA), the representative body of the domestic steel producers, in a communique to the Prime Minister’s Office not too long ago attributed the cost rise to acute shortage of iron ore major to a sharp rise in its costs, northward movement of steel costs in international markets with which Indian costs ‘move in sympathy’ and subdued domestic steel production.