While domestic demand weakened due to the
localised lockdown demand from the export market remained robust.
Domestic steel prices continue to remain
at a sharp discount compared to international steel prices, indicating that
there is room for a further price hike, analysts said.
The global steel prices witnessed a
significant rally in the second half of FY21, especially in the US and Europe.
The HRC (hot-rolled coil) prices in the US have spiked to above $1,600 per
tonne in May 2021 from the levels of around $550 per tonne in May 2020.
Meanwhile, the domestic steel prices HRC
prices are around Rs 70,000-71,000 per tonne and Cold Rolled Coil (CRC) costs
around Rs 83,000-84,000 per tonne.
“Domestic steel prices continue to remain
at least at 15-20 percent discount to the international steel prices,” Analysts
at Care Ratings said in a report.
Steel demand in India has weakened due to
the localised lockdown after the second COVID-19 wave, weighing on prices. The
consumption of finished steel continued to report a sequential fall for the
fifth consecutive month ended May 2021.
While domestic demand weakened due to the
localised lockdown demand from the export market remained robust. Export of
finished steel jumped 30 percent in May over the previous month, according to
the report.
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“Localised lockdown has also slowed down
construction activities. To offset the slowdown in domestic demand steel
companies have increased exports during the month,” the rating agency said.
Share of export in total finished steel
production increased up to 15 percent from 11 percent in the preceding month.
Exports to Italy, Turkey, Spain, Hong Kong and Nepal from India have risen
sharply in recent months due to a sharp rise in international steel prices.
Domestic demand for steel had picked up
pace in the second half of FY21, however, the second wave of coronavirus has
mildly hit demand from certain sectors.
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Analysts expect domestic demand to be
lower in the Q1FY22 however in Q2 demand is expected to return with the
unlocking of restrictions. The capacity utilisation rate of user industries
will start to improve as more people get vaccinated and return to work in the
coming months thereby pushing steel demand.
“Steel producers are likely to cover up
the lost production in the subsequent months and therefore there is no change
in our annual crude steel output forecast of 9-11 percent growth for FY22,” the
report said.
CNBC