Steel costlier than Covid level after firms hike prices by Rs 2,000 a tonne

The increase was on the back of a pick-up in domestic demand in rural and non-infra spaces

Steel firms have raised prices by around Rs 2,000 a tonne from this month, taking them higher than the pre-Covid levels. Most companies have increased prices of flat steel by Rs 1,500-2,000 a tonne from October 1. 

The average price of hot rolled coil (HRC), a benchmark for flat steel prices, is now Rs 43,500 a tonne. This was Rs 39,000 a tonne back in March just before the lockdown. The increase was on the back of a pick-up in domestic demand. 

Ranjan Dhar, chief marketing officer, AMNS India, said, month-on-month, there is an improvement in domestic demand. “After the lockdown, the first segment to recover was rural and then non-infrastructure demand started picking up. Then, we saw an uptick in passenger vehicles and now commercial vehicle sales have improved 10-15 per cent,” he said. 

According to a Motilal Oswal report, on a cumulative basis, steel mills have hiked prices by Rs 7,000-Rs 7,500 a tonne since July. “We believe robust demand in flat rolled steel is also driven by replenishing of inventories by end-users amid tight supply of HRC, even as inventories remain low in the system. Moreover, export commitments of domestic steel mills for October deliveries are likely to keep the supply situation tight in India,” it said.

Production and consumption have been increasing since India entered the unlock phase. According to the data, production of crude steel and finished steel registered an increase of 5.1 per cent and 6.7 per cent, respectively, during August over July. However, on a year-on-year basis, production of crude and finished steel in August was lower by 4.2 per cent and 5.5 per cent, respectively. Consumption of finished steel in August registered an increase of 7.7 per cent month-on-month.

Though prices are higher than pre-Covid levels, companies said international prices have increased much more since July. What may be a cause for concern is that prices have started softening in the international market. In September, prices in China dropped by 4 per cent. Exports, too, have tapered.