The steel prices have sky rocketed particularly in the last six months supported by the strong recovery in domestic steel demand and rising global international prices, touching a lifetime high of Rs 58000 per tonne which is expected to decline in the coming months.
China has also started to pick up production after the lunar day backed by the growth in infrastructural activities. The rise in global steel production and steep resistance from end user industries may upset the rise in domestic steel prices keeping in mind the declining global steel rates.
The increased availability of iron ore reflected by its easing of its prices may further dampen the prices. NMDC has reduced prices of iron ore lumps in the last month by Rs 600 to Rs 5100 per tonne. However, NMDC recently announced an increase of Rs 100/tonne taking a note of the hiked prices from Orissa Essel Mining. The increased availability of iron ore in turn will enable the small and medium sized mills to restart production thereby narrowing the gap between demand and supply of steel.
The Union budget 2021 announced a cut on customs duty on semis, flats and long products of non-alloy, alloy and stainless steel to 7.5 percent. Further the duty of scrap was exempted up to 31st March,2022. Centre’s decision to reduce the import duties will benefit the non-FTA countries especially China. This will make domestic prices more competitive and they have to align their prices with the landed cost of imports. The correction is likely to take place in the coming two months. All these afore mentioned reasons will put pressure on the prices of Steel.
However few factors will provide resistance to this dip.
Large fiscal stimulus package announced in countries like US, Europe and China to recover the ailing economy and support the infrastructure growth will keep steel demand for these countries on the boil.
India may witness strong steel demand owing to the growth in end user industries like automobiles, white goods, forging and packaging industries with the domestic economy showing signs of recovery and entering the positive terrain, registering a GDP growth of 0.4%. Allocation of more than 500 new projects in National Pipeline Infrastructure (NIP), increase in capex in health care infrastructure and allocation Rs.1,18,101 crore for Ministry of Road Transport and Highways will further strengthen the steel demand. At the same time, the rural economy is also showing signs of recovery.
Introduction of bill in DFI will act as a provider and catalyst for infrastructure spending which shows Centre’s positive intent to boost infrastructural growth in the country.
However, the second wave of corona may hamper steel demand with partial lockdown already being implemented in few states. Strict lockdown measures and restrictions implemented in the future will certainly cease infrastructural activities and an economic slowdown will put immense pressure on steel demand. All these global and domestic socio- economic factors will contribute to the volatility in steel prices in the coming months.
