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Global
steel prices (free-on-board, China) are set to stabilise in calendar 2023
on-year, after falling over 40% to $570-590 per tonne in Dec 2022 from the
early-April peaks of $1,000 per tonne on tepid steel demand, the report said
NEW DELHI : The steel sector in India is expected to see healthy
traction owing to supply chain alteration, according to a latest report by
rating agency CRISIL.
“Global steel prices (free-on-board, China) are set to stabilise in calendar
2023 on-year, after falling over 40 per cent to USD 570-590 per tonne in
December 2022 from the early-April peaks of USD 1,000 per tonne on tepid steel
demand," the report said.
Following the global trend, domestic
steel prices are expected to soften only a minimal 2-4 per cent on-year (for
flat steel) in fiscal 2024, after seeing a decline of over 30 per cent last
December from the historical highs of April, the agency said.
According to Crisil, flat steel prices
had climbed 25 per cent in just two months at the onset of the conflict between
Russia and Ukraine but cooled off due to a drop in raw material prices,
imposition of export duty by the government of India, and rising stock levels.
However, prices are once again set to turn the corner as steel producers face
rising input costs.
A large part of this is because the Indian steel industry imports 90 per cent
of its coking coal requirement, majorly from Australia.
“While coking coal prices were on a
declining trend for majority of this fiscal, short-term volatility was observed
in anticipation of supply chain disruptions. Easing of China’s unofficial ban
on Australian-origin coal import will not only add to further volatility but
also alter the supply chain, yet again. While there are reports that three
power plants and a steel player in China have already been given the go-ahead
to purchase Australian coal, more entities are likely to be allowed," the
report said.
That said, since China’s unofficial ban,
Australian miners and traders have redirected supplies to other Asian and South
American destinations. China, on its part, has come to rely on Russian and
Mongolian coking coal supplies. These reasons, along with flattish demand
growth forecast in China despite its government’s real estate push, will
prevent a major rally in Australian coking coal prices in 2023.
“Anticipation of China-Australia coal trade resumption had already driven
coking coal prices beyond $300 per tonne by late December. But with the Chinese
new year nearing, uptick in trade volumes between Australia and China is
expected only beyond March 2023. However, any major imports by China is anyways
unlikely, given Chinese steel mills have already adjusted to Russian and
Mongolian coal over the past two years, which comes at a healthy discount to
landed Australian coal. With coal production in Australia unlikely to see any
sharp increases due to environmental concerns, coking coal prices are set to
stay elevated in 2023 around the $250-300 mark," said Hetal Gandhi,
Director, CRISIL Research