Surge in steel price opens up room for companies to increase rates

Steel prices started rallying from March after the Chinese New Year holiday

The rally in steel prices in the global market has widened the gap between global and domestic prices beyond the peak levels of 2008, leaving headroom for further hikes.
 
Prices started rallying from March after the Chinese New Year holiday. In India, it was felt in the trade segment from about the third week of March and then mills increased prices beginning April. But the gap has widened further due to a surge in global prices.
 
Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel India (AM/NS India), said international steel prices have increased further since domestic prices were hiked at the beginning of the month. “Hot-rolled coil (HRC) in Europe is now at $1150, US at $1,550, and China FOB at $920,” he added.“If you look at import parity, the gap between domestic and non-free trade agreement (FTA) countries is now at Rs 17,000 a tonne. With FTA countries, it’s at Rs 16,000 a tonne,” said Dhar.
 
Mill prices of HRC in the domestic market were at Rs 58,000-59,000 a tonne.
 
According to Isha Chaudhary, director, CRISIL Research, the current price differential is the highest in over 13 years, surpassing the previous high of Rs 13,000 a tonne seen in June-August 2008.
 
Steel prices, globally, had peaked in June-August 2008, before the global financial crisis sent commodity prices crashing. “The recent rally in global steel prices has led to further widening of domestic and international (landed) steel prices. The price gap, which stood at around Rs 10,000 per tonne in March 2021, has increased to Rs 17,000-18,000 a tonne as of the third week of April,” said Chaudhary.
 

On price hike, a major steel producer said, “We will review the market.” Another producer said that a call will be taken next month for monthly contracts. The steel industry believes a new level is being set in prices. “There is a structural shift and it seems prices will settle at the new levels. Input prices (iron ore) are also creating new levels. International iron ore prices are at $178 a tonne and in the domestic market, NMDC has increased prices,” pointed out Dhar.
 
NMDC revised prices on March 21 and again on April 3. Effective April 14, prices of lump ore were increased by Rs 1,100 a tonne and fines by Rs 500 a tonne. Prices of lump ore are currently at Rs 6,950 a tonne and fines Rs 5,060 a tonne.
 
Jindal Steel & Power Managing Director V R Sharma said during the past seven months, the prices of iron ore, metallics, hot briquetted iron, direct reduced iron (also called sponge iron), and scrap have increased substantially.
 
“Ferro alloys cost has increased 30-35 per cent, shipping costs have gone up multifold. Most consumables like ferro alloys are coming through container shipment and the cost per container has gone up by more than 200 per cent on many of the routes. The overall impact on cost is more than Rs 15,000 per tonne in steelmaking, which has led to an increase in steel prices,” added Sharma. “The international demand for steel has increased because of an overall increase in consumption.  Hence, the outlook is very strong and positive, but customers are facing hardship because there is a time lag between raw material and finished goods prices,” said Sharma.
 
High raw material prices have put secondary steel producers in a spot. “High input cost is strangulating secondary producers, who are not organised players. Last Saturday, prices of iron ore from Odisha increased sharply,” said a secondary producer.
 
For primary steel makers that have raw material security, the spreads are currently at an all-time high.
 
According to the SteelMint data, the prices of HRC and cold-rolled coil (CRC) in the trade segment have touched an all-time high.
 
Excluding Mumbai, HRC prices were at Rs 63,000-64,000 a tonne and CRC at Rs 74,000-75,000 a tonne, revealed the SteelMint data.