Slowing global demand, cheap imports, and softer input costs to reverse a nearly six-month rally
With China set to cut down production to control rising steel inventory levels, any major increase in global prices is unlikely.
Domestic steel prices, which have been on a rally since December 2022, are set to bend under the combined weight of a slowdown in global demand, influx of cheap imports from far-eastern Asia and Russia and cooling raw material prices. Domestic hot-rolled coil (HRC) and cold-rolled coil (CRC) trade prices fell by Rs 2,000 in mid-May 2023 from the peaks of the previous month to Rs 59,000–59,500 per tonne and Rs 63,000–63,500 per tonne, respectively, in the Mumbai market. Following a flurry of cheap imports, most large steel mills corrected list prices for both HRC and CRC by Rs 2,000-2,500 per tonne in early May against April 2023 prices. Meanwhile, primary thermo-mechanically treated (TMT) trade prices saw a steeper fall of Rs 2,800 and are currently trading at Rs 57,000–57,500. End-consumer industries have switched to need-based procurement in anticipation of further price corrections.
The upshot: annualised flat steel prices (HRC) will fall 2-3 percent on-year in fiscal 2024 after declining ~9 percent in the previous fiscal. Primary long steel (TMT), which is not influenced by import prices on account of its minuscule trades, will see a sharper correction in prices. Overall, long steel prices are set to decline 3-5 percent this fiscal after rising 4 percent in the previous one amid a fall in input prices and a steep correction in secondary TMT prices, in line with cooling thermal coal prices.