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Steel sector hopes rise as pressure eases

But may go for production cuts if cheaper imports continue

Aditi Divekar  |  Mumbai 

Steel prices in India seem set to recover after months of pressure but producers say they need respite from cheaper imports.

Some primary steel producers say they have cut prices, following continued “dumping” from abroad and reduction in iron ore prices by major producer NMDC. Others say they’re unable to cut prices and speak of reducing output, instead, if needed, rather than continue incurring losses.

Chinese hot-rolled (HR) steel prices have seen a recovery of three to four per cent in three weeks. This has made some steel companies see stability arriving in the market. Others say they continue to remain hurt because of increased dumping from China, Russia and Ukraine.

State-owned Rashtriya Ispat Nigam and Kalyani Steel are marginally lowering their prices. Essar Steel and JSW Steel have decided to roll over prices for the month. “As of now, we are negotiating with clients. There is certainly a cut in prices but we do not know at what level it will settle,” said R K Goyal, managing director of Kalyani Steels.

“Though marginally, we have already reduced prices of nearly all our products for this month,” said M V Chary, in charge of pricing at Rashtriya Ispat. Increased import of cheaper steel from neighbouring countries had hit Indian companies, in an already dull market. This led to domestic prices declining over the past six months.

“Observing all international parameters, our sense is that there is now some stability in the domestic market. We are still reviewing the situation but for May we have rolled over the prices,” said Jayant Acharya, director (commercial and marketing) from JSW Steel.

Globally, iron ore prices have moved up to $60 a tonne from $47 earlier. Prices of HR sheet in the US have also gone up, along with some upward revision in prices of the alloy in China. Most companies say domestic prices will head upward, as demand is beginning to pick up. Steel prices have bottomed out and are left with no room to fall further, said industry officials.

“We can certainly see demand improvement at the grassroot level as enquiries are going up, orders are fructifying. We get a sense that there is concrete demand,” said Vikram Amin, executive director (strategy & business development), Essar Steel.

“The automobile and capital goods segment are showing improvement in demand. Leading indicators like medium and heavy commercial vehicles have picked up well. So, demand is improving,” said Acharya of JSW Steel. As far as the infrastructure segment goes, it will take a while to pick up, mostly in the second half of the year. India's steel consumption grew 2.2 per cent in 2014 to 75.2 million tonnes. Demand might rise 6.2 per cent this year and 7.3 per cent in 2016, says the World Steel Association.

Domestic steel prices are likely to go up by five to 10 per cent this financial year, said officials. Though the demand scenario seems to be improving, companies say continued imports might trigger production cuts among primary producers, as secondary players have already reduced production considerably. “If the dumping doesn’t stop production cuts are most likely among primary players. There is going to be no escape from that,” said Goyal of Kalyani Steel. In the financial year ending in March, imports jumped 71 per cent to 9.3 mt, mostly from China.

To cut losses in the coming months, companies are taking various efforts on costs to maintain margins. “We are taking steps in areas like coking coal blends and iron ore blends to keep costs under control and improve efficiency,” said Acharya of JSW Steel.

First Published: Mon, May 11 2015. 00:49 IST