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India: Steel companies say demand picking up, see upward revision in prices

Domestic steel producers are a divided lot when it comes to price revision for May, but are upbeat about the demand prospects going ahead.

While some companies see stability returning to the market amid improvement in global demand, others continue to face the brunt of increased dumping from countries like China, Russia and Ukraine.

Steel makers like state-owned Rashtriya Ispat Nigam and Kalyani Steel are marginally lowering product prices, but Essar Steel and Sajjan Jindal-led JSW Steel have decided to rollover prices for the month.

“As of now we are negotiating with clients. There is certainly a cut in prices but we do not know at what level it will settle,” said R K Goyal, managing director of Kalyani Steels.

“Though marginally, we have already reduced prices of nearly all our products for this month,” said M V Chary, pricing in-charge at Rashtriya Ispat.

Increased imports from several neighboring countries has left domestic steel players in a lurch as there are no takers for their products in an already dull market. Due to this, domestic steel prices have been declining for the last six months.

“Observing all international parameters, our sense is that there is some stability in the domestic market now. We are still reviewing the situation but for the month of May we have rolled over the prices,” said Jayant Acharya, director (commercial and marketing) from JSW Steel.

Globally, iron ore prices have moved up to $60 per tonne from $47 earlier. Prices of hot rolled sheet in the US have also gone up along with some upward revision in prices of the alloy in China.

Going ahead, however, most companies feel that domestic steel prices will only head upwards as demand is beginning to pick up. Steel prices have bottomed out and are left with no room to fall further, said industry officials.

“We can certainly see demand improvement at the grassroot level as enquiries are going up, orders are frutifying. We get a sense that there is concrete demand coming into the market. It is not just the sentiment,” said Vikram Amin, executive director (strategy & business development), Essar Steel.

“The auto and capital goods segment are showing improvement in demand. Leading indicators like medium and heavy commercial vehicles have picked up well. So certainly demand is improving,” said Acharya of JSW Steel.

“As far as the infrastructure segment goes, it will take a while to pick up and much will come mostly in the second half of the year, which is seen much better than the first half,” he added.

India’s steel consumption grew 2.2% in 2014 to 75.2 million tonne. Demand may rise 6.2% this year and 7.3% in 2016, says the World Steel Association.

Domestic steel prices are likely to go up by 5-10% during the current fiscal, feel officials.

Though the demand scenario seems to be improving, companies are of the view that continued imports may trigger production cuts among primary producers as secondary players have already reduced production to 50%.

“If the dumping doesnt stop in coming months, production cuts are most likely among primary players. There is going to be no escape from that,” said Goyal of Kalyani Steel.

In the fiscal year ended in March, steel imports jumped 71% to 9.3 million tonne, most of which were from China.

Cheap Chinese steel has forced some domestic mills to cut prices and post losses in recent quarters. In order to cut losses in coming months, companies are taking various efforts on the cost front to maintain margins.

“Though I cannot quantify the benefits from cost measures taken, we are certainly taking steps in areas like coking coal blends, iron ore blends to keep costs under control and improve efficiency,” said Acharya of JSW Steel.
Source: Business Standard