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Print[Ferro-alloys.com]Steel prices in the country have fallen way below international prices, contrary to the historical trend of a premium over international prices.
Currently, net realisation on a ton of hot rolled coil is around Rs38,000, which is a 6-9% discount to the import parity price of Chinese steel, which is considered the benchmark.
The total steel manufacturing capacity in India is around 90 mt currently. Typically, long products make up 55-60% of the total produce, mainly consumed by the construction and real estate sector. The rest is flat steel, consumed by the sector automotive, capital goods and machinery, etc.
Demand from the construction segment has dwindled over the past couple of years, with major infrastructure projects stuck for various reasons.
Even the automotive sector, the fastest-growing consumer segment for steel makers, has lost steam, with sales growth this fiscal expected to be around 3.6%, according to the Society of Indian Automobile Manufacturers.
Adding to the steel makers’ woes are cheaper steel imports, particularly from Japan and Korea, with which India has signed preferential trade agreements.
“Since the beginning of the current fiscal, we have already imported close to 5-6 million tonne of hot rolled coil and out of this, almost 30% is from Japan and Korea,” said Ramesh Iyer, vice president - product development,
NCDEX, India’s second biggest commodity exchange.
Steel makers are learnt to have made a representation to the government on the cheaper imports. But, given the treaties, there is only so much the latter has said it can do on this.
All this has made it difficult for local steel players to increase prices.
Indeed, most of the companies which did effect price hikes this quarter have either already rolled back or are considering rolling back the hikes.
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