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Coronavirus outbreak: Uncertainty looms large over steel's April price hike

The steel sector has been gradually recovering from lows since November

Ishita Ayan Dutt  |  Kolkata 

steel
The price rise in India was in line with the global trend | Photo: iStock

that had increased this month are still holding ground in spite of the outbreak which has put the global economy on the edge.

In March, companies had increased prices across-the-board by Rs 500-800 a tonne, the fourth in a row, taking the hot rolled coil (HRC) price to Rs 37,000 a tonne. However, companies are not sure whether an increase in April will be possible in the wake of the virus outbreak.

M C Agrawal, executive director (sales & ITD), Steel Authority of India Limited (SAIL), said the price increase in March was holding. "There is no change in demand which is already recovering. Auto has also started picking up."

"Whether an increase in price will happen in April is difficult to say," he added. But he sounded confident about a recovery in demand for steel. "There is a fear factor right now because of coronavirus, but things will settle. At best, the pick-up could be delayed by a month or two," he said.

For the time being there could be some ups and downs due to coronavirus, said Hervinder Singh, president- mining & international projects, Jindal Steel & Power Limited (JSPL). "Prices are holding for this month," he added.

"The India story is very positive, and at JSPL, we have crossed all records in production," Singh said. The last quarter was the best so far, and this quarter ending in March will be even better," he added. JSPL is ramping up capacity and expects to end 2020-2021 with 8.5 million tonnes.

The steel sector has been gradually recovering from lows since November. The price of HRC had touched a low of Rs 32,250 in the first week of November. have been clawing back month-on-month since November.

However, primary and secondary producers are unsure how the virus outbreak would play out in the next few weeks. The secondary producers said that the sentiments had hugely been impacted by the outbreak.

"There is no visibility on where things are headed right now," said a secondary producer. ICRA, in a recent report on the sector, said that prices were expected to come under pressure in the near term as an aftermath of COVID-19 outbreak.

The price rise in India was in line with the global trend. Chinese export HRC prices had increased from $428 a tonne end-October to $496 a tonne in January 2020, ICRA noted. However, since mid-January, due to a slowdown in China's steel consumption, following outbreak, prices had witnessed a six per cent fall.

But producers pointed out that the situation in China had now been contained and shipments were moving out while that in Europe was spiralling out of control. For the steel producers, though China is not a major market, it is a source for consumables and spares. A major steel producer said that right now there was no threat to business continuity.

The domestic were currently trading at a discount of seven per cent to landed cost from China and at a discount of three per cent to landed cost from Japan, said ICRA.

"While this provides a headroom to domestic steelmakers to increase steel prices, rising number of confirmed cases of coronavirus in India remains a concern, and the same along with continuing macroeconomic headwinds, could affect domestic steel consumption and pressurise steel prices in the coming months," it said.

Consequently, ICRA expects the domestic steel consumption growth to remain between four and five per cent in FY2021 as against the November 2019 forecast of 6.5 per cent.

First Published: Fri, March 13 2020. 17:11 IST
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