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| Experts see normal steel production by March |
| Ishita Ayan Dutt / Kolkata Feb 02, 2009, 00:06 IST |
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The demand in the steel sector appears to be crawling back and by March, production is expected to be restored to normal levels. The price fall in China has been arrested and raw material prices like those of scrap have moved up on demand.
Vinod Garg, director (marketing), Ispat Industries, said production would resort to 85-90 per cent capacity levels in February, while in March it should normalise. Most of the domestic steel majors had cut production in November. JSW Steel, which announced a 20 per cent production-cut in November has, however, come back to normal production levels in January.
Seshagiri Rao, finance director, JSW Steel, said the worst was October-December. “Domestic demand is much better. Projects are slowly coming back internationally but auto components are yet to pick up. Also, while China demand is domestically okay, in Europe, US and the rest of Asia, prices are stable,” he said. But right now, all that the steel industry is discussing is a demand revival, not prices. Even if prices do not appreciate in the near term, margins are expected to be better.
JSW Steel has negotiated with Rio Tinto for a cut in coking coal prices for the last three months of its existing contract.
Rao said, for the current three months of the existing contract, prices had been reduced to $175 a tonne from the earlier $305 a tonne. The move would set a precedence for raw material contracts, which would come up for renewal mostly in April.
Jatinder Mehra, chief executive officer, Essar Steel, said steel prices came down to 1994 levels. So, iron ore prices should also come down to that level.
Steel prices have fallen by 50 per cent from their peak levels in 2008. Hot rolled coil prices globally were at $500-$550 a tonne while new raw material contract prices were yet to set in.
Mehra was a little skeptical about a demand revival and said that demand would come back once the financial markets were set right, which would boost consumer demand. “The demand seen in China is a situational blip,” he added.
However, global studies indicate that restocking could begin like last year, especially once the Chinese new year ushers in.
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