Domestic steel prices to soften 10-15% in 2022: S&P Global Platts

Domestic hot-rolled coil prices are expected to average Rs 53,550-56,700 a tonne in CY 2022. This compares with Rs 63,000 per tonne YTD in 2021, which is 58% higher than Rs 39,761 per tonne in CY2020

Domestic steel prices will soften by 10-15 percent in 2022 due to increased production in turn easing of supply constraints, S&P Global Platts Analytics report said today.

Domestic hot-rolled coil prices are expected to average at Rs 53,550-56,700 per tonne ($705-745 per tonne) in calendar 2022. This compares with average prices of Rs 63,000 per tonne year-to-date in 2021, which is 58 percent higher than Rs 39,761 per tonne in CY2020.

The pre-pandemic average in CY 2019 was Rs 38,567 per tonne.

The spread between India domestic and China domestic HRC prices blew out to $220 per tonne on Nov. 15, the highest level since April 2017, according to Platts data.

Since late 2017, there has been a close correlation between Indian and Chinese steel prices. The two prices diverged in October this year but have subsequently started to narrow again.

“We expect the spread to revert to historical norms, with the Indian price influenced by subdued market conditions in China in 2022 due to slower economic growth and the downturn in the country’s property sector,” said the report.

High domestic Indian steel prices this year have in large part been due to Indian mills lifting exports to take advantage of the higher prices on offer overseas, which has tightened local supply. India has particularly targeted Vietnam, Italy, Belgium, and Turkey.

Over April-October, India exported 14 percent of its finished steel output, a similar ratio to the year before, but up from 8 percent in April-October 2019, Platts Analytics calculates based on Joint Plant Committee data. “

Indian crude steel production is expected to reach 122 million tonne in CY2022, compared with around 115 million tonne this year, on the back of stronger output from JSW Steel’s Dolvi steelworks in Maharashtra, and from Steel Authority of India’s works in West Bengal.

On the demand side, manufacturing purchasing managers’ index data suggests a decent pipeline of domestic orders, though car making continues to be hit by the semiconductor shortage Indian factories are struggling to pass on the full extent of rising costs from inputs such as steel. Construction and machinery companies have struggled to absorb the high steel prices, and infrastructure project timelines have been pushed back.

Inflationary pressures should ease next year, however, with the drop in steel prices, boosting demand and consumption. Less attractive overseas prices will result in greater availability of steel for domestic customers.

S&P Global Ratings has forecast Indian GDP growth of 9.5% in the fiscal year ending March 31, ahead of 7.8 percent growth in FY2023. A severe outbreak of the omicron variant of the coronavirus could dent domestic steel demand and operations, it said.