Galvanized steel producers to cut prices by 3-5% on falling raw material costs

Aim is to pass on the benefit of lower raw material prices to consumers

Galvanized steel manufacturers will soon cut their product prices by 3-5%, or about Rs 1,000 – Rs 1,500 a tonne, following a steep decline in raw material prices. 

“Falling raw material prices has reduced cost of galvanized steel production which we will pass on to consumers,” said Ankit Miglani, Deputy Managing Director of Uttam Galva Steels, India’s largest galvanized steel producer.

While steel prices have declined by a marginal 0.5-1% in the past month, the commodity has seen a more than 9% per cent decline in the last four months due to weak demand from consumer industries. 

Interestingly, raw material prices have also followed suit but the decline has been sharper in raw materials than steel. Prices of both pig iron and sponge iron have slumped by over 12% and 9% respectively. While pig iron closed at Rs 21800 a tonne on Friday, sponge iron was quoted at Rs 19700 a tonne in Raipur (Chhattisgarh) market, a sharp decline from their respective levels of Rs 24800 a tonne and Rs 21700 a tonne on September 15, 2014.

Another raw material, zinc, has witnessed a slump of more than 14% since September 2014 on low demand from consumer industries. Galvanized steel consumers about two-third of global zinc production.

Galvanized steel is primarily used for large construction projects including bridges, tunnels and giant housing complexes. Zinc is used as a thick layer coating on steel longs which makes bars corrosion resistant. Galvanized steel is corrosion-free which enhances life of constructed projects. 

On melting ground Falling steel prices (Rs / tonne)
Particulars	Sept 15 ‘14	Jan 15’15	Variations (%)
Pig iron#	24,800	21,800	12.10
Sponge iron#	21,700	19,700	9.22
Hot rolled coil*	44,000	40,000	9.09
Wire rods (5.5 mm)	41,500	38,000	8.43
Billet#	30,200	28,200	6.62

Source : OreTeam, * Delhi, # Raipur

Galvanized steel producers normally follow the price movement of steel and zinc. Since both raw materials have witnessed a decline in the last few months, galvanized steel producers will also follow cut in their basic products’ prices.

Primary steel producers have already announced 2-4% price cut to pass on the raw material price decline to consumers. Iron ore prices have hit multi-year lows, currently trading at $58 a tonne ex-China. 

With the government’s focus on infrastructure sector, the price cut across all steel and galvanized steel segment will provide a boost to the entire construction sector, said an analyst.