Steel prices unlikely to go up in coming days: IDFC

Domestic steel prices are unlikely to go up in the coming days due to a possible correction in raw material costs and slower growth in industrial production, brokerage firm IDFC Securities said today.

"In the coming period, factors preventing any upside in steel prices are a possible correction in raw material, a seasonal weak quarter in Q2 and a decline/slower growth in industrial production," the brokerage firm said in a report.  

Though IDFC Securities did not give guidance as to where the price of coking coal and iron ore, the two important raw material for steel making, would head to; industry sources, however, said the price of the two should come down in the coming days on increased supply from Australia.  

 

Coking coal is currently hovering at $310 per tonne and the contract prices for iron ore, in the current quarter, averaged at $178 a tonne.

The country's industrial growth rate shrunk by more than half to 6.3% during April on account of a poor showing by the manufacturing and mining sectors. The government described the development as "disturbing".

Domestic steel prices have consistently remained lower than international landed cost over the last several months as a possible fall out of the surplus scenario, it said.

While the landed costs of Hot Rolled Coils were at Rs 36,936 per tonne in May; the domestic steel prices were at Rs 38,050 a tonne.

IDFC Securities said that the sales volume of the steel firms were hit during April and May by dealer de-stocking and the same was also likely to continue in the current month.

"Demand is weakening. Investment-led demand has consistently remained weak over the last several quarters. Consumption-led demand growth is also showing signs of weakness.

"Unless longs demand improves in H2 FY12, we expect steel demand in India to grow by just 5-6% against the earlier general estimates of a double-digit growth," it said.