Steel prices are expected to firm up by 6-10 per cent this month wiping out the current domestic discount to the landed cost of imports.
Steel companies are planning to increase prices on the back of rise in raw material cost and revival in demand across sectors, including infrastructure, construction, capital goods and automobile sectors.
Steel prices in the US have increased to $900 a tonne after levy of anti-dumping duty, while that of China, Korea and Japan are hovering at about $700 a tonne. However, it is trading at a discount of 9 per cent to landed cost at $640 a tonne.
Jayant Acharya, Director (Commercial & Marketing), JSW Steel, told BusinessLine that steel prices across the world are going up with the economic growth catching pace and China cutting down on its production by 75 million tonnes last year, besides with the current rate of production this year it should trim output by 50 mt.
This apart, the demand in China itself is looking up which gives great comfort to large steel consuming countries like India, he added.
Private sector investment
As the government is investing big time in infrastructure, there are already signs of revival in private sector investment boosting steel demand which should bridge the current discount, said Acharya.
With a cumulative steel production capacity of 130 mt, Indian companies may end up this fiscal with production of 106 mt at 82 per cent capacity utilisation. There has been no fresh capacity addition happening except for a few brownfield projects undertaken by JSW Steel and Tata Steel.
On the opening up of commercial coal mining by private sector, Acharya said that JSW Steel would consider if the government opens bidding for the world’s largest coking coal mine at Jharia in Jharkhand, while the Group company JSW Energy would look into opportunities in the current auction.
After the sharp increase, JSW Steel expects raw material prices to remain at current level.
Coking coal prices ex-Australia had increased from $145 a tonne to $230 a tonne in the last one year and is trading at $215-$225 a tonne currently, while iron ore jumped from $37 a tonne to $80 a tonne and are hovering at $75 a tonne now.
The recent run-up in ferro alloy and scrap prices are the new cause for concern.
Zinc, which was trading at $2,700 a tonne last January, has gone up to $3,500 a tonne in February, while ferro silicon prices were up 50 per cent in the last one year. Scrap prices increased 35 per cent to $380-$400 a tonne raising cause for concern, he said.
JSW Steel, which targets to produce 4.7 mt of iron ore this fiscal, has already started production in one of its mines in Karnataka and expects another mine to start soon.
The country’s steel demand should increase by 5.5 to 6 per cent with an upward bias next fiscal from expected demand growth of 5.5 per cent this fiscal ending, said Acharya.
Source: The Hindu Business Line