Primary steel producers might cut prices Rs 500-700 a tonne for December, due to a fall in the cost of raw materials and subdued prices abroad.
Typically, primary producers follow the trend in the spot market, where products have turned cheaper by up to Rs 700 a tonne for longs and Rs 200-250 a tonne for flats this month.
Global prices continued to reel under the threat of imports from China and weakness in demand, forcing producers to cut prices to safeguard market share. CIS Steel prices saw the highest decline, falling four per cent to $ 475 a tonne as of Monday. China cold-rolled coil prices fell $10 a tonne to $465 a tonne on Wednesday.
“Any kind of drastic price movement in the foreign market has a similar repercussion in domestic markets. However, we are yet to take a final decision in terms of steel prices,” said Sesharigi Rao, joint managing director and group chief financial officer, JSW Steel.
Prices of raw materials have been declining continuously. Iron ore continued its downward trend on lower demand, as China indicated pollution-driven steel production curtailments. This month, prices for ore with 62 per cent iron content and 58 per cent content fell to $75.1 a tonne and $63.6 a tonne, down $4 and $2, respectively.
Global iron ore prices are likely to remain soft due to increased supply from major producers and weak demand from China. In India, prices have also fallen due to NMDC cutting prices by Rs 200 a tonne for domestic steel mills, in line with a similar move for foreign importers.
Usually, domestic steel producers raise prices in January, in anticipation of a rise in demand from the construction and infrastructure sectors, which peaks ahead of the monsoon. But steel demand has remained low so far this year and is expected to remain subdued in the coming season due to a slowdown in economic growth and, consequently, in investment on infrastructure.
“Therefore, the seasonality factor is unlikely to help producers raise prices this year. Instead, they will have to cut steel prices in the coming months,” said Goutam Chakraborty, an analyst with Emkay Global Financial Services.
Indian primary steel producers have urged the government to protect the domestic industry from Chinese dumping by widening the differential between the duties on scrap and finished steel. With 2.5 per cent import duty on scrap and 7.5 per cent on finished steel, the differential is only five per cent, the lowest among countries in the Association of Southeast Asian Nations. Officials of steel mills have written to Prime Minister Narendra Modi to raise the import duty on steel to safeguard domestic producers.
Recently, steel and mines minister Narendra Singh Tomar hinted a decision on the matter might be taken in the next few days.
India’s steel imports jumped 33 per cent to 4.19 million tonnes (mt) between April and September, with China contributing 1.34 mt, up 108 per cent against the corresponding period a year ago. If the trend continues, steel imports this financial year could double to nine mt.
The World Steel Association expects steel demand in India to rise 3.4 per cent to 76.2 mt this year, following growth of 1.8 per cent in 2013. Structural reforms and improving confidence would contribute to growth of six per cent in 2015, the agency said.
Source: Business Standard
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