Domestic demand for steel down on expectations of a
After a persistent rally, domestic steel prices are
finally set to decline with a sharp fall in benchmark Chinese export prices.
Moreover, the domestic demand has slowed down on
expectations of a drop in prices in the coming months.
Jatin Damania, Vice President (Fundamental Research),
Kotak Securities said steel prices in the domestic market is expected to fall
in the coming months as current domestic prices are at a premium to import
parity. Chinese HRC prices have fallen by 20 per cent in the last month.
Margins of steel
Margins of Indian steel companies may come under
pressure due to high coking coal prices and expected fall in steel prices, he
said. Steel companies have also cut down on exports with the drop in global
After touching a high of $939 a tonne in September,
Chinese steel prices are on a decline and touched $750 last month. It fell
further in November. However, in India steel prices have been increasing on the
back of rise in coking coal prices and logistics costs.
Port quarantine in
The supply chain crisis is expected to get worse with
China implementing a seven-week port quarantine which will further delay the
full recovery of the shipping industry.
In an attempt to keep the Covid virus at check, China
continues to prohibit crew changes for foreign crew and recently imposed a
seven-week mandatory quarantine for returning Chinese seafarers. Even vessels
that have refreshed their crew elsewhere have to wait two weeks before they are
allowed to port in China.
To comply with these norms, shipowners and managers
have had to reroute ships, delaying shipments and crew changes, adding to the
supply chain crisis.
Also read: Steel prices may
drop everywhere, except in the US
Last month, domestic hot-rolled coil price was hiked
by ₹3,500 a tonne to ₹69,600 on higher coking coal prices while TMT bar prices
remained flat at ₹48,525 per tonne.
However, since the start of November, global steel
and iron ore prices are trending lower due to weak demand. In fact, steel
prices are now trading at around an eight-month low.
Sensing that Indian steel prices will also follow a
similar downward trend with lag effect some of the large steel consumers have
deferred fresh orders and prices are set to fall next month, said a top steel