European Crisis and the monsoon likely to prompt another round of price cuts
Mumbai: Reacting to falling demand, steel prices have started declining in most regions world-side. This includes the CIS Export region, where prices dipped below $600 per tonne. Domestic prices in China, Europe and the US are also heading northward.
In India, steel prices are expected to fall further, even as the industry had cut prices by about Rs 1000-1,500 per tonne on June 1. Global production cuts also loom large.
Nil Surekha, director-finance, Ispat Industries said: “Demand is weak and prices are also expected to fall further. In India, demand is taking a hit mainly due to the monsoons. Second, considering the current scenario, consumers are also not buying more. They are looking at de-stocking and then re-stocking.”
However, Seshagiri Rao, joint MD and group CFO, JSW Steel, “Steel prices have already corrected by $100 a tonne and Indian companies have reduced prices on June 1.” Rao believes demand has stabilised over the last couple of weeks and feels the downside from these levels will be limited.
Metal entering India at a cheap price is also one of the reason for prices falling in the country, says Surekha.
Prices of HRC are currently at about Rs 32,000 a tonne, a fall of Rs 2,000 a tonne over the last month. Experts say, demand in India is still good but they would not be surprised if steel manufacturer announce one more round of price cuts, which could be in the range of about Rs 1,000 to Rs 1,500 per tonne.
“In China, local prices are currently about $ 530-550 per tonne and we are close to bottom as far as Chinese prices are concerned. In Europe, prices are currently in the range of $700-740 per tonne and a $50 per tonne correction is expected there in Europe,” said a Mumbai-based analyst.
According to a JP Morgan report, European steelmakers are braced for output cuts in the third quarter as restocking slows and the demand outlook dims. ArcelorMittal last week reportedly said, that it was considering idling three blast furnaces in Europe to meet lower demand.
Steel secretary Atul Chaturvedi had earlier this month said, “Steel prices are expected to fall mainly due to the present European crisis and slackening demand ahead of monsoon. Prices of long steel products — mainly consumed by infrastructure and construction firms — have already fallen by Rs 5,000 a tonne since April.”