Steel companies to increase long product prices

Improvement in demand and revival of activity in construction sector prime reasons

Steel companies are contemplating an increase in the prices of long products this month. Prices of some are likely to increase by up to Rs 500 a tonne.

“Our marketing team is meeting tomorrow to decide on prices,” Nitin Johari, director, Bhushan Steel, said.

“We have rolled over prices for some products, but are increasing these for others. Sales have been good,” A P Chowdhury, chairman and managing director, Rashtriya Ispat Nigam Ltd, said.

The reasons for an increase in long steel, primarily used in the construction sector, are two-fold.

First, the demand scenario has improved. There has been a revival of activity in construction.

 

According to a Capitaline report, steel demand in the country was expected to improve in the fourth quarter, owing to increased construction activity as projects would see faster completion before closure of the financial year. That apart, there is a cost push-factor.

Public sector iron ore miner NMDC, which had reduced prices by about six per cent in January, is also expected to increase prices this month. Iron ore is a key raw material and the increase would be in keeping with the international trend.

Brazilian miner, Vale, has already indicated it expects long-term iron ore prices to remain in the $110-$180 a tonne range. Brazilian steel makers have also indicated an increase in prices. However, there is overcapacity in the global market, though prices have corrected in recent months.

A Citi report said European prices corrected from a peak of $720 a tonne in April 2012 to $590 a tonne in November 2012 and have now rebounded to $675 a tonne. Chinese export prices corrected from $645 a tonne in April to $505 in September 2012 and have now rebounded to $590 a tonne. Citi, however, doesn’t expect steel prices to rise much from current levels.

Steelmakers indicated chances of domestic flat steel prices increasing were slim or, at best, marginal. Flat steel is used in the white goods and automotive sectors.

Flat steel prices increased on January 1 with a revival in demand. Current prices of hot rolled coil, the benchmark for flat steel, are around Rs 33,000 a tonne.