Steel prices improve but may face headwinds: Ind-Ra
May 29, 2021
Mumbai (Maharashtra) [India], May 29 : Domestic steel consumption is likely to be low over 1Q FY22 quarter-on-quarter due to the second Covid wave but not at the low levels witnessed over 1Q FY21 when there was a complete shutdown of activities, according to India Ratings and Research (Ind-Ra).
The second wave is likely to impact auto and consumer durable demand and partially delay construction and infrastructure activities.
However, Ind-Ra said the strong international prices and export demand will enable steel producers to increase export levels, although high freight and shipping costs and container availability could be the areas of concern.
India's finished steel consumption in April stood at 6.78 million tonnes, down 23 per cent month-on-month but still 8x year-on-year higher.
On the other hand, crude steel output was at 8.3 million tonnes. The domestic steel output has been driven by increased exports and higher capacity utilisation levels than last year.
Accordingly, the domestic steel output was 27 per cent year-on-year higher at 30.1 million tonnes over January to April.
On a global level, crude steel production of 64 countries was 23 per cent higher at 169.5 million tonnes last month, driven by opening up of economies as the pace of vaccinating citizens against Covid-19 increased, higher government investments and strong steel prices.
Ind-Ra said the fall in Chinese future prices over the last week can partially impact India's export orders and domestic prices over the near term.
"Considering the Chinese government's effort in checking prices of steel and lower demand expectation due to the lockdown, domestic as well as international prices are likely to face headwinds, but will remain higher than pre-Covid levels."
Domestic hot rolled coil prices increased by 3 per cent month-on-month and 78 per cent year-on-year in mid-May to Rs 65,250 per tonne. Similarly, domestic rebar prices increased Rs 3,000 per tonne month-on-month to Rs 56,000 per tonne.
Domestic steel prices have increased due to higher export orders, leading to a lower supply within the trade segment, strong global demand and high international steel prices and iron ore prices.
However, domestic demand is likely to be subdued due to the lockdowns and increased infection rates, thereby impacting auto and consumer durable demand and consumption levels over 1Q FY22.
