Amid demand revival, steel companies hike prices by Rs 2,000/T

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New Delhi, Oct 5 | In a sign of economic activity gradually picking pace in the unlock phase, steel companies have increased the price of the metal for the fourth month in a row in October on the back of demand revival and firm price trends in the overseas market.

Benchmark hot rolled coils (HRC) prices have increased by Rs 1,000-2,000 per tonne for October deliveries to Rs 43,000-43,500 per tonne whereas (cold rolled coil) CRC prices stand at Rs 52,000 per tonne.

The price rise in October is contrary to expectations of a decline in prices in China, where flat steel prices have dropped by four per cent in September 2020.

The price has also increased for long steel products used in real estate projects, but the price rise there is moderate compared to the HRC prices and long products are still priced about Rs 1,500 per tonne lower than flat products.

With the price rise in October, HRC prices are now higher than pre covid price line of Rs 42,000 per tonne.

On a cumulative basis, steel mills have hiked HRC steel prices by Rs 7,000-7,500/tonne since July, 2020. The improved demand outlook is driven by a strong recovery in automotive, consumer durables and other white goods.

“We believe this hike underscores the current strength of domestic demand for flat products (led by recovery in auto and white goods) and tight market supply,” said a sectoral analysis done by brokerage Motilal Oswal Institutional Equities.

“… demand in flat rolled steel is also driven by replenishing of inventories by end-users amidst tight supply of HRC, even as inventories remain low in the system. Further, export commitments of domestic steel mills for October 2020 delivery are further likely to keep the supply situation tight in India,” the brokerage said.

While domestic conditions have pushed up steel prices in the country, pressure points remain by way of falling steel prices in the biggest producing and consuming nation China. There steel prices have declined by $ 25/tonne in both domestic and export markets during September 2020.

Domestic HRC prices, which stood at parity to landed cost of imports from South Korea ($ 555/tonne CNF India) are now trading at a five per cent premium post this hike (to $585/tonne). China export prices have declined to $503/tonne ($ 528/tonne CNF India).

The price trend in China, post the national holidays (which will be over in a week), would determine the direction for regional and domestic steel prices. If prices in China do not improve post the holidays, the Indian prices could be at risk as a 10 per cent premium to Chinese prices would be unsustainable for long. This is because imports would rise substantially, the brokerage report said.

But the good run is expected to continue for long steel products. There is an expectation of recovery in long steel prices with demand recovering post monsoon. The recovery in long steel product prices has remained subdued compared to flat rolled steel as rebar prices are still at Rs 1,500/tonne lower YTD FY21 (while HRC is higher by Rs 5,000/tonne).

Source: IANS

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