Steel prices up by 10% on firm demand

The long product prices continued its onward journey last week. Prices of various input materials as well as finished long products have surged by almost 10% since December beginning. This is a repeat of December 2009 to some extant, when prices had surged abnormally, by almost 23%, only to correct in January.

The fear of paying higher prices in January 2011 among buyers and stockiest led to releasing their demand for January also thus creating a sever push on supply side, which led to this surge

While some of the Indian steel majors have hiked their prices of long products in last 15 days, further hike is expected on week opening to catch up with market prices.

But correction in prices of long products market in India which is saddled by huge over capacity is just a matter of time and it would be interesting to watch when the correction starts

The flat steel product market has been the happening place over the last week. The spark was provided by the mid month price correction by INR 500 per tonne to INR 750 per tonne in anticipation of firming sentiments in domestic market and an attempt to bridge the gap between import offers and domestic levels.

However this booster had at the best dripping effect immediately. In the last 1 week the sudden spurt in buying has more of a speculative tenor as the stockiest and traders make beeline to pile stock before an inevitable price hike in January by the steel majors. It is prevalently anticipated that the prices of flat products will go up by at least INR 500 per tonne to INR 1000 per tonne come January.

But the moorings are favorable for at least January as the international prices have remained firm. Moreover the consumption from the white good segment will pick up soon as manufacturing and stocking picks up as a prelude of summer just before the budget.

Source: http://www.commodityonline.com/futures-trading/market/Steel-prices-up-by-10-in-India-on-firm-demand/1827.html

Steel Mills Cut Production on High Input Cost.

Squeezed between high raw material and range-bound steel prices, secondary and mini-producers of steel have reduced their operating capacity by half in the past month. Although steel mills have revised product prices more than once recently, they’ve failed to pass the proportionate increase in raw material prices fully to consumers.

As a consequence, not only have margins of secondary and mini steel mills fallen to unsustainable levels of between one to five per cent. The supply of steel long products such as ingots, billets, TMT Bars and re-bars, used in infrastructure and construction sectors, has also become tight.
Long steel is a fragmented market and the producers are induction furnace-oriented. With the current level of raw material prices, they lack working capital. “If you go around many pig iron producers across India, you will see that they cannot buy coal and iron ore at current prices,” said Koushik Chatterjee, group CFO of Tata Steel. “There is scarcity because these smaller players have gone out of the market suddenly.” The larger players were unaffected, he said, and it was the smaller and scattered units that faced the brunt of the volatility in prices.

Source:http://www.business-standard.com/india/news/steel-mills-cut-productionhigh-input-cost/422310/

JSW, SAIL and Essar may hike steel prices by 2% to 3% within three days

This would be the second such hike in January—rising raw material prices and the demand-supply mismatch may further worsen the scenario

Surging prices of raw materials-mainly coking coal-have started showing their impact, as Indian steel companies are likely to increase prices by 2%-3% within the next two to three days.

“JSW Steel will increase prices of its products by 2%-3% by the middle of this month,” Sharad Mahendra, senior vice-president, marketing and sales, JSW Steel, told Moneylife.

“Steel Authority of India Limited (SAIL) has decided to increase prices by Rs1,250 per tonne-effective from 10th January-but the official announcement is yet to be made,” said a source close to the development, who preferred anonymity.

On 3rd January, JSW and Essar Steel increased prices of flat products by around 4%- 5%, while SAIL decided on a 3% rise in the price of its products.

But Essar Steel preferred not to comment on its future strategy. A spokesperson from Essar Steel told Moneylife, “Right now, we are reviewing (the) market situation. Within the next couple of days, we will have (a) clear picture.”

Prices of coking coal, the main ingredient for making steel, have been going up in the international market, as mining operations and shipments from Queensland, Australia, the main supplier of the commodity, have been hit by the unprecedented floods that have swamped the region (See: http://moneylife.in/article/4/13075.html).

“Prices of coking coal and iron ore are increasing at a rapid pace, and this has forced us to go in for another price hike this month,” added Mr Mahendra.

Indian steel companies expect contracts for coking coal prices in the next quarter to reach $300 per tonne from the current January-March contract prices of $225 per tonne. In spot markets, coking coal prices have already crossed $270 per tonne.

Margins of steel companies are already under pressure due to high raw material costs. However, a few players will pass on the hike to customers. “We will definitely pass on the hike to customers as our margins are already coming down,” said Mr Mahendra from JSW Steel.

Source: http://www.moneylife.in/article/4/13123.html

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