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Indian steel prices begin to fall but Chinese demand holds the key

Steel prices appear to be heading southwards after JSW Steel, one of the largest producers of the metal in the country, cut prices of hot-rolled (HR) and cold-rolled coils by ₹1000 a tonne in the first week of March.

Mint reported in February that steel prices are expected to fall by as much as 10% from their January highs over the next few months, because of a softening of inputs costs, especially of iron ore, and increased competition from cheaper imports with India cutting customs duty on steel will likely drive down steel prices.

Domestic prices of HR coil, a flat steel product that is further processed and used in transport, construction, shipbuilding and capital goods surged 54% year-on-year in the December quarter amid a robust recovery in domestic demand and mirroring higher global steel prices.

Domestic prices of HR coil prices corrected by 3% in mid-February 2021 to ₹53,750 tonne, but were still 40% higher y-o-y. Domestic flat steel prices have reduced due to rising inventories with traders who are reluctant to procure steel at the high price levels since they have sufficient inventories, a slight moderation in demand from auto and pipe makers and a disparity between the mill price and trade price, a report from India Ratings and Research said.

Domestic rebar prices have also corrected due to the reduction in iron ore prices and increasing production by secondary steel producers. Domestic rebar prices in mid-February were at ₹48,800 a tonne, 9% lower month-on-month but 38% higher compared to the same period last year. Furthermore, the recent budget announcements reducing the import duty on steel scrap shall encourage secondary steel producers to now increase the output since reliance on the current high-cost iron ore has reduced. This would help improve rebar supply and put pressure on steel prices, the report said.

The future trend in prices, however, will be linked very closely to the demand-supply balance in China. Chinese demand is likely to remain largely stable in 2021 with the steady recovery of its economy. But any production cut may lead to a price hike, which may force prices in India on the upward trajectory again.
Source: LiveMint

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