India: Steel producers to benefit on account of raw material availability, says Soma Mondal, chairman, SAIL

Steel trade in the global market will see a significant change with China cutting down production and the Chinese government withdrawing various support it provided to its steel industry.

“The Chinese government, which has been providing support to its steel industry in terms of various policies, recently has been withdrawing the same so as to ease the environmental concerns. The decision to cut down production has a tremendous impact on the input materials such as iron ore and coking coal. The demand for these are expected to come down and the prices will follow the path also,” Soma Mondal, chairman, SAIL said at a Bengal Chamber of Commerce and Industry-organised minerals, mining, and metals conclave.

She said although Indian producers were not much dependent on iron ore inputs, international price movement of iron ore could have a “bearing on the domestic iron ore prices”. On the other hand, coking coal, imported in huge quantities, especially by the branded producers, would have improvement in availability down the line, correcting prices. This would help producers in sustaining margins and “steel trade in the international market will see a significant change”, Mondal said.

Coking coal prices surged from $100 per tonne to $ 400 per tonne but there has been some recent softening with prices coming down to $ 320 per tonne.

“The Indian producers are expected to benefit from the opportunity, especially in the markets where there are direct competition with the Chinese suppliers like Southeast Asia and the Middle East, Mondal said.

China’s total domestic steel output has been cut down by 21.4% year-on-year in October and China has been aggressively cutting down steel output during the second half of the fiscal. But Mondal said it has to be seen to what extend China curtailed its production and how much addition it made. While on one hand, it has been closing down its inefficient units on its pledge of complying with the environmental norms, it was adding efficient units too.

However, India, on the other side, with its next phase of expansion plans, was experimenting with technologies for lower carbon emission in steel making. The government’s focus was on the use of green hydrogen since it has technical issues in using it. But one has to control carbon emission in use of coking and non-coking coal, Mondal said.

On the prices of steel, she said the prices were expected to remain “range-bound not only for the rest of the year but for the coming year too”. The Indian market was strong for the government’s thrust on infrastructure building, which accounted for 68% of India’s total steel consumption. While domestic demand would remain intact, infrastructure building across geographies would aid Indian companies get higher margins.

“Flat product prices are in sync with the global prices,” Mondal said adding in Europe prices were significantly higher and therefore the arbitrage was huge.
Source: Financial Express