Fresh rally as global demand picks up

IN FOCUS/ STEEL

International steel prices were clawing back to old heights and domestic market could take a cue from it, though not in the near term.

Industry sources said, hot rolled coil (HRC) prices in the Europe and US were hovering above the $600 per tonne levels and even in China, prices were looking up.

The main reason behind the spurt in Chinese prices was due to low inventory levels. Spot iron ore prices and scrap prices had also increased and very Chinese mills had long-term contracts for raw materials.

However, the domestic market appeared to maintain status quo. Sources said, despite the increase in raw material prices, producers were unlikely to raise prices immediately.

Sources said, prices of HRC were being kept at Rs 25,000 per tonne and was likely to be stable, for now.

Around 70-80 per cent of raw materials were sourced locally and hence the producers were shielded against rising international prices.

However, the local demand was at its best with the auto sector posting a significant growth. Also, white goods and fabrication segments posted good gains.Sources said, there was hardly any inventory.

The producers maintained that despite the retortion of duty entitlement passbook (DEPB) benefits, the industry was focusing on the home market.

"Our first priority is local market" they said and clarified that this was not due to pressure from the government.

Out of the exports that were being made, bulk of the exports were to the Europe and some product categories also to the US. The producers, by and large, were keeping out of the Chinese market.

They said that last time around the companies had a nightmarish experience in China when traders went back on orders. "The banks are not dependable", they added.

Companies were bullish on the home market, with the current growth rate in the economy. They said, if a 7-8 per cent growth rate was to be maintained then steel consumption was bound to pick up.

However, a section believed that the budget proposals should have addressed infrastructure more specifically, which could in turn propel steel consumption.