The Upward Trend In Prices Is Sustainable

Pointblank Steel price rise

After a three year slowdown, the domesic steel industry seems to have bounced back with a vengence. Steelmakers, for the third time in three months, have raised prices of hot-rolled coils (HRC) by Rs 1,200 per tonne to Rs 16,500 per tonne. Prices of cold-rolled (CR) products have also shot up by Rs 2000 per tonne, to Rs 23,000 per tonne. The jump is even sharper for galvanised coils (GC), which have increased by Rs 5,000 a tonne to Rs 30,000 a tonne. Vinod Garg, director of Ispat Industries, spoke to Rumi Dutta on the sustainability of this price rise.

 

What are the factors driving up domestic steel prices?

The jump in domestic prices is due to the steep increase in demand from the US, Europe and China. The increase in prices is primarily on account of increase in international prices, specially in the US, Europe and China.

Most importantly, the increase in Chinese demand for flat products has boosted demand growth. The Chinese consumption of HR coils have increased to around 170 million tonnes and is expected to further increase to 190 million tonnes.

What's your outlook on international prices?

International prices of HR coils, which is currently at around $270 per tonne, is expected to increase to $300 per tonne, while the GP prices is expected to stabilise at $500 per tonne.

But what has driven the sharp increase in galvanised products?

The increase in prices of GP/GC products in the US and China have made these markets lucrative, thereby prompting domestic producers to export. This, on the other hand, has resulted in a reduction in supply of these products in the domestic market, leading to the price increase.

Any increase in prices of HR coils is automatically followed by an increase in prices of GP/GC products. Yet another reason is the traditional pre-monsoon increase in demand.

Do you think this price rise is sustainable?

Due to the sluggish situation that prevailed in the December-March period, many of the steel mills had either decided to curtail operations or had closed down.

This makes the situation more healthy for the major steel producers as the closed capacities would take time to revive. Consequently, the upward trend in prices is sustainable and is expected to continue at least till the end of the current fiscal.