Steel prices may not fall further, but China key: Indian steelmakers

Steel prices, which have been falling for the last few months, may have bottomed out and may not fall further, major Indian steelmakers told Business Standard. The average monthly price of hot rolled coil (HRC) in Mumbai stood at Rs 55,443 per tonne for June, 2023. This was down from Rs 60,260 per tonne in March this year and much below the peak of Rs 76,025 in April, 2022, according to the data from market intelligence and price reporting firm SteelMint. HRC is a benchmark for flat steel, which is used in automobiles and white goods.

“I think prices have bottomed out,” said T V Narendran, managing director (MD) and chief executive officer (CEO), Tata Steel. Most steel companies will lose money at current levels of iron ore and coal prices globally, he said, adding that the prices of these key raw materials had started moving up in the last few days.

Both JSW Steel and ArcelorMittal Nippon Steel India (AM/NS India), too, echoed that prices were unlikely to drop further.

“Internationally also, [steel] prices have picked up by about $20-30 a tonne in the last few weeks,” said Jayant Acharya, joint MD and CEO of JSW Steel. “So, prices have now stabilised…the fall has stopped. In long products, too, the correction has been more than what the secondary sector can afford,” he added.

In long products, used in construction and infrastructure, rebar prices have been falling since January, SteelMint data showed. The average monthly price for blast furnace route rebar, stood at Rs 60,450 a tonne in January, 2023 and fell to Rs 53,975 in June, this year. This was a long way down from Rs 72,880 per tonne in April 2022.

Ranjan Dhar, chief marketing officer at AM/NS India, said trends in global markets in the last three weeks suggested prices had bottomed out. “Notably, Chinese HRC export offers, which were previously in the range of $535-540 per tonne FOB (freight on board), have now increased to $560-565 per tonne,” he said. 

An upturn for steel companies on a global scale would depend on demand recovery, he said. “Encouragingly, the inventory levels in both international markets and India remain very low, which bodes well for the industry,” Dhar added.

Hetal Gandhi, director - research, at CRISIL Market Intelligence and Analytics, said that the Chinese government’s guidance on steel output would hold key for prices.

“Given China’s strict policy of producing less steel than the previous year, steel mills must cut production by 8–10 per cent from present levels to meet last year’s figure. Production cuts and the subsequent fall in exports from China will lead to a gradual uptick in prices.”

“We believe prices have largely bottomed out and are set to stabilise hereon before witnessing an uptick post-Monsoon,” Gandhi added.

Steel prices started increasing from February as China lifted restrictions on public activity to slow down the spread of Covid-19. But Narendran of Tata Steel pointed out that the recovery was fragile, which dampened spirits in the last few months. 

Acharya said that though China’s growth was below expectations, there were positive factors elsewhere. “There is a slight improvement in enquiries from Europe and some other markets, [and a] correction in energy prices globally is a positive for better economic activity.”

Steel prices have seen wild swings in prices since the Ukraine war. Prices of HRC peaked at Rs 76,025 in April 2022, but later fell to an average monthly price of Rs 57,850 a tonne in January 2023 as global demand slowed reflecting on prices. India, however, has seen good demand but prices have been moving in a different direction. 

Steelmakers are confident about the business of Indian steelmakers. CRISIL said that for April–May of the current financial year, demand for steel had increased by 8 per cent year-on-year.

 “Across steel end-user segments, the demand in India has been good. The economic activity and general consumption growth is playing out. We are very confident of a strong India economic growth in this decade,” Acharya said.

Narendran said that the demand outlook was “quite positive” in India but customers postponed purchases due to falling prices. “Now that prices seem to have bottomed out, we expect the demand to better reflect the fundamentals.”

Steel demand growth in FY24 was projected to reach 8 per cent in India, AM/NS India’s Dhar said. The estimate takes into account various factors and reflects a conservative outlook, he added.