Post-monsoon infrastructure and auto demand, along with higher coking coal costs, are expected to push steel prices higher, though rising imports could limit mills’ pricing power.
Indian steel prices are likely to rise further in the coming weeks as a seasonal recovery in infrastructure and automotive demand tightens the market, while higher coking coal costs put additional pressure on producers.
The increase could help steelmakers recover margins squeezed by rising raw-material costs. However, higher steel prices could also raise input costs for infrastructure, construction and automobile companies as demand strengthens.
Hot-rolled coil (HRC) prices have already climbed sharply after a marginal decline earlier in the summer. Government data showed Indian mills cut HRC prices and other steel product prices by about Rs 280 per metric tonne between June and July.
But HRC prices rose by Rs 4,000 per tonne between August and early September, reaching a four-year high, according to commodities consultancy BigMint.
“We expect steel prices to increase by around 3,500 rupees per ton in the coming weeks,” said Vedant Goel, director at Enlight Metals.
Coking coal, a major component of steelmaking costs, has become a key driver of the price increase. Mills have been passing on some of the higher costs to customers, said Shankhadeep Mukherjee, principal analyst for steel at consultancy CRU.
More from BusinessThe recent recovery has also been supported by planned maintenance shutdowns at major mills, tighter spot availability and low distributor inventories, BigMint said.
Steel demand could receive another boost from post-monsoon restocking, festive-season buying and infrastructure and project activity. Higher coking coal costs are also expected to support prices in the near term.
IMPORTS COULD CAP THE RALLY
Despite the bullish outlook, analysts and industry executives expect rising imports to limit the extent of any further price increase.
India imposed a safeguard duty on some steel imports last year to curb a surge in overseas shipments. It also launched an anti-dumping investigation in June into HRC imports from China, Japan and Russia.
However, imports have continued to increase. India was a net importer of finished steel between April and July, with finished steel imports rising 36.6% from a year earlier, government data showed.
China accounted for 31 per cent of India’s finished steel imports during the period, making it the country’s largest supplier.
Higher imports remain a key risk to steelmakers’ margins if competitive pressure intensifies, Fitch Ratings said in a September 1 report.
For now, however, a combination of higher raw-material costs, seasonal demand and tighter domestic availability is expected to keep Indian steel prices on an upward trajectory.
