Long steel product makers in the state have cut down prices in response to poor demand from real estate sector, which has been hit hard by frequent interest rate hike.
High quality steel billet in the state is currently quoted at Rs 27,500 per tonne, excluding taxes, lower than Rs 28,400 sold in the first week of June. Billet is a semi-finished long steel product used in construction works.
"The primary reason for the fall in prices is poor demand from the real estate. The frequent interest rate has made the loans costlier, thereby affecting the housing sector,” said the marketing manager of a long steel maker.
This is in addition to the normal slump in construction activities following the onset of monsoon.
The Reserve Bank of India has raised the repo rate by 25 basis points to 7.50 per cent and the reverse repo rate by a similar margin to 6.5 per cent in its latest policy review. The rates have been hiked 10 times in last 15 months as a part of RBI’s inflation controlling measure.
According to Confederation of Real Estate Developers' Association of India (CREDAI), the real estate developers are feeling the pinch of rate hike as the number of booking orders has been falling constantly for past few weeks.
"Interest rates for housing loans have gone up by a whopping two per cent in a year's time. This raised the monthly installment dues and thus, the number of people who could have afforded the loans, slipped,” said D S Tripathy, president, CREDAI Orissa chapter.
The long steel prices have dropped at a time when rates of flat steel products, used in automobile industry, are rising. Many flat steel makers including JSW and Essar have increased flat product rates in June, citing higher input costs.
The long steel makers believe the piquant situation will continue in the July-September quarter too and hope prices may rebound in October-December period, after the monsoon season. They also blamed the tight supply of iron ore for higher input cost and for closure of some units.
"It is true that long steel product prices have come down by Rs 1,000-1,500 in a month's time due to poor demand, and at the same time input cost has gone up. So, we have shut down our Orissa plant since a month due to lower ore supply,” Rabindra Sharma, president (marketing) with Shyam steel said.
