Steel prices to rise further from Oct: CMIE

Domestic steel majors are expected to hike prices further in October on the back of a likely upswing in industrial and infrastructure construction activities, according to a CMIE report.

"We expect steel companies to hike prices in October- November once industrial and infrastructure construction activity gathers pace," the Centre for Monitoring Indian Economy (CMIE) said in its monthly review.

In FY12, the agency expects finished steel prices to average 7% higher than in 2010-11. It also noted that steel prices have already risen nearly 15% in the first quarter of the fiscal.

However, it has sharply scaled down its growth forecast for finished steel production for the fiscal from 12% to 9.5%.

"The downward revision is due to the lower-than-expected growth in demand for steel in the first quarter and a shortfall of iron ore likely to be faced by the steel units in Karnataka," it said.

Earlier, Tata Steel Managing Director H M Nerurkar had said domestic steel demand was likely to grow at about 9% during the current fiscal. The steel giant expects steel prices to remain stable, with prices going up or moving down by Rs 1,000 a tonne for some time.

"India will remain a net importer of steel despite concerns on growth in other markets," he had said recently.

Iron ore prices are ruling high due to the ban imposed by the Supreme Court on mining in Bellary and the huge demand for the commodity from China, the report said.

Most companies have signed coking coal contracts for the September quarter at USD 315 a tonne, which is 40% higher than the year-ago level.

It may be recalled that on July 29, the Supreme Court had suspended iron ore mining in Karnataka's Bellary district.

"If the ban continues for long, the plants located in Karnataka will have to cut down production," the CMIE said.

Finished steel consumption grew by a paltry 1.9% during Q1. "Although production grew by 12.5% in June, a 7.8% growth for the June, 2011, quarter was below expectations," the report said.