Steel prices set to drop on weak season after two-year rally
May 09, 2022
New Delhi [India], May 9 : Steel price, which has risen sharply in the past two years hitting a record high of Rs 76,000 per tonne in April 2022, is set to decline to Rs 60,000 per tonne by the end of the current financial year on weak seasonality with the onset of monsoon, CRISIL Research said in a report on Monday.
Domestic steel prices are showing signs of fatigue after a relentless rally over the past two years following supply disruptions, decarbonisation measures globally, especially in China and geopolitical risks stemming from the Russia-Ukraine war, which has driven up raw material costs, the report said.
While prices have defied correction predictions because of continuing uncertainties, some moderation is on the cards with the onset of monsoon, it said.
In April this year, steel prices hit an all-time high of over Rs 76,000 per tonne, which is 95 per cent higher than March 2020 levels, when COVID-19 was declared a pandemic.
As per the CRISIL Research report, steel prices are likely to decline to around Rs 60,000 per tonne by the end of the current financial year.
"Despite moderation in demand in January-March, steel prices have inched up owing to higher input costs and buoyant exports. Also, domestic supply stayed tight, eliminating the differential between global landed and domestic prices, which was once nearly Rs 15,000 per tonne," Hetal Gandhi, Director, CRISIL Research.
While steel mills made the best use of elevated global prices, domestic demand began to waver. Soaring construction costs and multiple price hikes by makers of automobiles, consumer appliances and durables drove down demand in the last quarter of fiscal 2022.
In the first quarter of the current fiscal, domestic demand could see an optical recovery because of a low-base effect, but consumer sentiment remains sluggish with higher input costs leading to the postponement of purchases and construction decisions, stated the report.
