Steel makers see prices to remain stable in near-term

Steel makers feel that the price of the alloy is likely to remain stable in the near-term as chances of oscillation of its raw materials' cost are unlikely.

"The price of coking coal is now hovering at around $275 per tonne. I don't think it will go up to $300 a tonne. Iron ore is also stable now. Hence, I don't see steel price going up in the near-term," Jindal Steel and Power Group Chief Financial Officer Sushil Maroo said.

Since September last, domestic steel makers have raised prices on a number of occasions by an average of Rs 1-1,500 per tonne with an aberration in November when they slashed the price by around Rs 700 per tonne in sync with the softening global trend.

Prior to September, steel prices were flat for about 2-3 months, which prevented domestic firms from passing the rising input cost pressure to customers.  

Now, it is a tricky situation. Demand is on the rise to keep the pace with the rising infrastructure development. Again, higher raw material costs are set to squeeze the margin of the steel makers further if the increased burden is not passed on to consumers.

Indian steel is already costlier than that of China.

The price of spot coking coal is currently hovering at around $260-265 a tonne in Queensland, the largest coal producing province in Australia, which is facing worst-ever floods in the past few decades.

India relies much on the imported coal from Australia to meet its demand-supply gap.

State-run Steel Authority of India (SAIL) imports over 6 million tonnes (MT) coking coal from Australia to meet its total 15 MT requirement a year. 10.5 MT of which is met through imports.

SAIL Chairman C S Verma had said in an interaction yesterday that domestic steel prices have already gone up by an average of 4-5 per cent in January and the price of coking coal in the coming days would determine where steel prices would head.

"Floods in Australia would not impact SAIL in the last quarter of the current fiscal as the company is sitting on sufficient inventory. However, if the situation continues for long (flood), it will affect SAIL. We are taking certain strategic measures," Verma had said but refused to elaborate further.