Steel prices to rise in spite of auto slowdown

Prices of flat and long steel products are likely to increase from next month, on the back of increased costs and low inventory levels.

Steel industry representatives indicated the domestic steel prices were currently lower than global levels, about $30-$40 a tonne. “The attractiveness of imports has gone as international prices are higher,” a steel producer said. This is tempting producers to increase prices.

The price of hot rolled coil, the benchmark for flat steel, is $793 a tonne in the international market, down from $835 a tonne in March. Rebar (in the long product segment), has been holding on, however. Its prices, which were at $741 a tonne in March, are now at $747 a tonne.

Flat steel is used in automobile and white goods, while long steel is used for construction. The likely price increase is despite the slowdown expected in the auto sector. “The slowdown in automobile will not have any impact. The usage here is four to per cent, whereas in construction it is 50-60 per cent. So, the segment will drive the demand,” an official of a flat steel producer said.

“The monsoon generally sees a slack in demand, largely as construction comes to a near halt. That apart, a government decision on several projects has been stuck,” said a producer.

Increase in costs also necessitates a price increase. Coking coal contracts for the quarter were struck at $330 a tonne, and iron ore, which had seen some softening is likely to spring back. This month, domestic steelmakers decided to roll over prices as demand was not conducive to an increase. “From next month, demand is expected to pick up from every sector, as the inventory levels are low,” JSW Steel director-commercial, Jayant Acharya, said.