Steelmakers hike prices by Rs 2,000 per tonne as demand improves

Indian steel sector seems to be on the road to recovery with companies increasing prices by around Rs 2000 per tonne across all products this month on the back of better demand and rising global prices. This is the second hike in less than a month after companies raised the metal price by about Rs 750 per tonne in July.

A combination of global price hike, supply correction that has happened overall in the system, and a pent-up demand as several segments are trying to make up for the lost quarters. In June the demand was very low and there were no margins, thus the price hike is well absorbed

State-run Steel Authority of India said its bookings remain strong even after the recent price hike.

Domestic steel prices are following the international price trajectory that saw a strong recovery on increasing demand from China. Car sales are slowly picking up in the country, while two-wheeler and white goods segments are doing well. Indian Railways is expected to start train service this month and the market will be bullish from then on

 

Pains suffered by the Indian Steel Industry during the Pandemic.

In April and May, covid-19 crushed domestic industrial and consumer activity. The hit on India’s biggest steel mills, which make up 65% of the country’s annual output of about 110 Million MT, was calamitous.

The industry has been left standing still. The cost of standing still has been very high.

During the pandemic, the mills’ massive blast furnaces continued to burn but made less than a third of pre-covid-19 levels of production. Why keep the blast furnaces burning for so little output? Because closure and reopening can take up to 12 weeks; the process is complex; and maintenance costs are high. This remains the nuclear option for steel makers.

In short, India’s mills continued to bear high fixed costs: firing furnaces but without making much steel. Big integrated mills posses the manufacturing and marketing agility, and capital base, to survive, with bruises. Smaller mills, which account for about a third of national output, lack the strengths to survive a trough, and many have capitulated.