Steel prices have fallen more than 40% in the year

Steel prices crack 40% in the year
Steel prices crack 40% in the year

by 5paisa Research Team Last Updated: Dec 10, 2022 - 02:53 pm 13.6k Views
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In the Indian market, lower commodity prices have been part of a global trend. However, steel prices have been among the worst hit falling as much as 40% from their peaks during the year. The fall has been driven by a number of factors from reduced demand to a slowdown in China to delayed infrastructure projects and fears of a general recession. After the sharp fall in the price of steel, hot rolled coils (HRC) still trades at around Rs57,000 per tonne in the domestic market. Indian exports of steel also got badly hit after the government imposed export duties on steel, which reduced the export demand for steel.

Hot rolled coils (HRC) is one of the most important steel product which goes into a slew of user industry demand like for construction, real estate, housing, consumer goods and automobiles. In early 2022, the prices of hot rolled coil (HRC) had started showing a clear upward trend and by April it had peaked at around Rs93,000 per tonne. From that point, the price of steel is down to Rs57,000 per tonne, which is approximately a fall of 40% from the peak prices in a span of just about 5 months. The government tax on steel exports was a big reason for the subdued demand and hence a glut of steel in the Indian market.

Even the outlook for the price of steel is not too bright for the coming quarters. According to a report in the Steel Mint, domestic HRC prices are likely to remain range-bound in the next quarter. That is largely due to  steel exports being lower than usual and huge inventory pressure likely to sustain. For now, the steel mills are unlikely to increase the prices due to huge inventories and supply in excess of demand. The intent of the government in banning exports was to ensure that there was more steel available domestically. However, with recession fears across the world, that appears to have backfired.

The idea was to help the domestic user industries of steel to protect their costs, but it has obviously backfired on the steel industry as exports have dropped sharply. In May this year, the government hiked the duty on exports of iron ore by up to 50%. At the same time, it had also hiked the export duties on steel intermediaries to 15%. Government also waived customs duty on the import of some key steel raw materials like coking coal and ferronickel, to reduce the cost of making steel in India. Clearly, in this case, the plot did not exactly pan out the way the government wanted it to happen.

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