You are here: Home » Markets » Commodities » Precious Metals
Business Standard

Steel prices likely to fall to Rs 60,000/tonne by March: CRISIL report

Steel prices, which have been on a song for the past two years, are finally set to correct on weak seasonality, and may trade at around Rs 60,000/tonne by the end of the current fiscal year

Topics
steel prices | Crisil report | fiscal year cycle

Press Trust of India  |  Mumbai 

Steel
Price corrections are likely due to the onset of monsoon next month which will pull down demand as constructions will be on hold along with the likely lower premium realisation that domestic mills may get from exports, the report said.

Steel prices, which have been on a song for the past two years, are finally set to correct on weak seasonality, and may trade at around Rs 60,000/tonne by the end of the current fiscal year, down from the Rs 76,000/tonne peak it scaled last month, says a report.

Prices are still holding high because of the continuing uncertainty over supply disruptions, decarbonization measures globally, especially in China and geopolitical risks stemming from the Russia-Ukraine war, which has driven up raw material costs, Crisil said in a report on Monday.

Price corrections are likely due to the onset of monsoon next month which will pull down demand as constructions will be on hold along with the likely lower premium realisation that domestic mills may get from exports, the report said.

According to Koustav Mazumdar, an associate director with the agency, the onset of the weak demand season because of the monsoon and less-lucrative exports mean domestic should begin easing and ultimately move towards Rs 60,000/tonne by March 2023, down from the Rs 76,000/tonne peak it scaled in just last month, which will still be well above the pre-pandemic levels.

Flat could rise 3-5 per cent this fiscal year after surging over 50 per cent in 2021-22. Hetal Gandhi, a director at the agency, reasoned that despite a moderation in demand in January-March, inched up owing to higher input costs and buoyant exports.

Also, domestic supply stayed tight, eliminating the differential between global landed and domestic prices, which was once nearly Rs 15,000/tonne.

On the other hand, export realization premia surged to USD75/tonne in early May. While steel mills made the best use of elevated global prices, domestic demand began to waver. Soaring construction costs, and multiple price hikes by companies in the auto, consumer appliances and durables space drove down demand in Q4FY22.

In Q1FY23, domestic demand could see an optical recovery due to low-base, but consumer sentiment remains sluggish with higher input costs leading to postponement of purchases and construction decisions.

Similarly, elevated prices and the resultant inflationary pressure impacted sentiment across the globe, eventually leading to a price correction. Since April, hot-rolled coil prices declined over 25 per cent in Europe and the US to USD1,150-1,200/tonne from a peak of USD1,600 in mid-March.

While domestic exports to these will remain high in Q1, retreating prices will narrow the arbitrage for domestic mills. To sum up, exports will remain range bound at 13-14 million tonne this fiscal on the back of revised quota to Europe and supply constraints in Southeast Asia.

However, the agency does not see a free fall as a myriad of uncertainties will limit a freefall in domestic prices, which though are showing signs of fatigue after a relentless rally over the past two years as the monsoon season sets in.

The report attributes the still firm prices to the heightened geopolitical risks that have limited the price corrections, which started moderating early this year.

However, the Russian invasion of Ukraine in late February, cranked the prices up again on supply-disruption fears. In Europe and the US, where the impact was greater, prices crossed the USD1,600/tonne-mark.

Then rising input costs added to the pain. Prices of international coking coal rose 47 per cent to USD670/ tonne in three weeks from USD455/tonne in late February, due to the flooding of mines amid high demand from countries that traditionally imported from Russia.

While coking coal prices have eased from their peaks, they continue to get support from strong demand at USD500/tonne. All this has kept domestic steel prices elevated. In April, they hit an all-time high of over Rs 76,000/tonne, which is 95 per cent over March 2020 levels, when Covid-19 was declared a pandemic.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, May 09 2022. 15:59 IST
RECOMMENDED FOR YOU
.