| Hitting the floor
Calcutta, Aug. 1: Domestic steel companies, led by the Steel Authority of India, have cut prices by Rs 500-1,500 a tonne from today. This is the third reduction since June.
High inventory coupled with cheap imports from CIS countries is the major reason for the price correction.
“After this revision, domestic prices are competitive with landed rates of imported steel,” an industry executive said.
There was an 84 per cent rise in steel imports in the first quarter of this year.
However, the companies said the revision was in line with the international trend.
“Domestic steel prices are in line with international rates. Therefore, any decrease/increase in domestic rates follow the global trend. The current price revision is in accordance with the same,” an Essar spokesperson said.
Most of the companies have slashed prices by Rs 500 a tonne for long products and Rs 1,000-1,500 for flat items.
However, companies feel steel prices was on the verge of bottoming out. Demand is picking up and the inventory is gradually depleting. “It would still take a month or two,” an executive of a steel firm pointed out. “This could be the end of a series of price cuts as global rates have begun to firm up,” he added.
Major Chinese companies have increased domestic prices by $30 from today. Indian hot-rolled coil prices are now hovering around $520-525 or Rs 23,000 a tonne.
From the beginning of this financial year, prices have come down by Rs 5,000'6,000 a tonne from its peak of Rs 29,000.
Prices in Europe are now hovering at $470 a tonne, while that in the US is about $480 a tonne on free-on-board (f..b) basis.
After adding freight of $40-50 a tonne, the landed price of steel from these regions would still be on a par with local rates.
A big worry for local players is steel import from CIS countries. The Indian Steel Alliance (ISA) has even asked the Union steel ministry to raise import duty from 5 per cent to 15 per cent.
Moreover, they are considering filing an anti-dumping case.
The ministry of steel, however, has declined to raise the duty saying it could not be changed because of a short-term phenomenon.
Only silver lining for Indian producers is the drop in spot raw material prices like iron ore. Coking coal prices have also come down from its peak.
Some units like Ispat Industries have reported gains to the tune of Rs 3,000 a tonne by using more scraps.
Industry is hopeful that a turnaround is round the corner following the three successive reductions. However, experts warn that the dizzy heights the industry touched last year is unlikely to be repeated in the near future.
Only solace is that prices are still above the previous peak of $475 tonnes in 2001 and 2002 and much above the low of $180 a tonne.