Why domestic steel prices may get a boost from last month’s lows
Global steel prices are set to stabilise in calendar 2023 on-year, after nearly halving from the highs touched last April as demand for the metal has softened.
International steel prices have shrunk by over 40% to $570-590 per tonne in December 2022 from the early-April peak of $1,000 per tonne.
Following the global trend, domestic steel prices are expected to soften, albeit just 2-4% on-year (for flat steel), in the year ending March 2024, after declining by around a third from the highs of April, according to rating and research agency CRISIL.
Flat steel prices had climbed around 25% in just two months at the onset of the conflict between Russia and Ukraine, but cooled off due to a drop in raw material prices, imposition of export duty by the Indian government, and rising stock levels.
However, prices are once again set to turn the corner as steel producers face rising input costs.
This is largely because the Indian steel industry imports around 90% of its coking coal requirement, majorly from Australia. While coking coal prices were on a declining trend for the majority of this fiscal, short-term volatility was observed in anticipation of supply chain disruptions. Easing of China’s unofficial ban on Australian-origin coal import will not only add to further volatility but also alter the supply chain, yet again.
That said, since China’s unofficial ban, Australian miners and traders have redirected supplies to other Asian and South American destinations. China, on its part, has come to rely on Russian and Mongolian coking coal supplies. These reasons, along with a flattish demand growth forecast in China despite its government’s real estate push, will prevent a major rally in Australian coking coal prices in 2023.
With coal production in Australia unlikely to see any sharp increases due to environmental concerns, coking coal prices are set to stay elevated in 2023 around the $250-300 mark.
Along with coking coal, domestic iron ore prices have also steadily risen since the withdrawal of export duty effective November 2022. Since then, the National Mineral Development Corporation has raised iron ore fines prices by over 30%. Prices are only set to move up further, with expected healthy domestic demand in a pre-election year and improving global iron ore prices which also rose by a fifth over the past two months.
Rising input costs has led integrated and secondary players to announce price hikes across segments over the last two weeks, by Rs 2,000-2,500 per tonne.
The rise in domestic prices in the coming months, however, will not be steep, as the threat of imports will continue to loom over the domestic market.
Copper prices saw a modest 0.33% gain, reaching 722 on Thursday, as worries about a slowdown in Chinese manufacturing loomed large. The November's NBS Manufacturing PMI slipped to 49.4, the second consecutive monthly decline, heightened concerns, emphasizing the need for additional government support to fortify China's economic growth. The NBS Non-Manufacturing PMI at 50.2, reflecting the 11th month of service sector expansion, hinted at a softer pace.
- Dec 01, 2023Read More
Our markets started the truncated week on a positive note and it rallied higher throughout the week. The first day of the December month infact witnessed a new record as the Nifty surpassed its previous high and ended in uncharted territory above 20250 with weekly gains of almost two and a half percent.
- Dec 01, 2023Read More