Domestic steel prices plummet on rise in imports and softening global rates

Indian steel prices, which climbed in lockstep with a rebounding economy, have made an about-turn as output bound for overseas returns home amid the threat of an escalating global trade war.

Monsoon rains that affect construction locally have also kept demand restrained Steel prices of long products, such as TMT bars, billets and ingots, have dropped around Rs 4,000-4,500 per tonne in the last 15 days and could fall further through August and September, said industry insiders. While demand for flat products is stable, experts say that producers are facing pressure to lower prices.

“The ability of Indian steel producers to export has greatly reduced due to the international trade wars, resulting in rising shipments into India. This has negatively impacted domestic steel prices,” said Ranjan Dhar, chief marketing officer at Essar Steel.

Dhar wants India to also increase tariff barriers, in line with other consuming countries.

According to SteelMint, prices of TMT stood at Rs40,200 per tonne in Mumbai as on June 15. This has fallen to a low of Rs37,000 per tonne on July 11. Prices of billets also fell from a high of Rs 36,800 a tonne in mid-June to Rs 32,000 on July 11.

To be sure, with the monsoons setting in, prices of long products used in construction are bound to trend lower. However, while every year the fall is about Rs1,000-1,500 per tonne, this year prices have dropped by almost three times.

A senior industry executive who did not wish to be named said: “Unfortunately in India, the TMT market has not matured like in Japan and China. This makes consumers buy a whole lot of it when the prices show signs of moving up and then sit on a stockpile, forcing the prices to crash.” However, data from the Joint Plant Committee on imports of non-flat products (bars, rods) throw up another notable observation. Such imports have more than doubled in May, both since May last year and April this year.

The jump assumes significance since the US imposed tariffs on steel imports in March and the European Commission launched its safeguard investigation into steel imports. To be sure, local consumption of steel has shown a growth of 8.5% in May over last year.

“The fallcould be attributed to seasonality, even though the quantum is unusual,” said Goutam Chakraborty, metals analyst at Emkay Securities. “Inventory clearing could be another reason,” he said. In the international markets, steel has declined, weighed down by softening prices of iron ore and coking coal. Iron ore prices hit a 7-month low last week.

Source: THE ECONOMIC TIMES