Domestic steel industry has been continuously raising product prices since November despite the absence of green shoots.
“There are no strong demand indicators, or green shoots, at all which can keep these price hikes sustainable. Demand from infrastructure is still to pick up and auto continues to be weak,” Sushim Banerjee, director general at Institute of Steel Development & Growth (INSDAG) told Business Standard.
Domestic steel producers have raised product prices by about Rs 2,000 per tonne for February 2020. “The February price hike is also in anticipation of a demand pick up that stockiest have stocked their yards. There is no on-ground demand so far,” Banerjee added.
Higher raw material costs, increased global steel prices and expectations of a demand pick up have been the only reasons for domestic steel producers to raise prices every month since November so far.
Currently, hot-rolled prices are ruling at Rs 40,000 per tonne in the domestic market, up from the 15-month low of Rs 33,500 per tonne rate noted in mid-2019. However, the current price point is far lower than Rs 47,000 per tonne rate for hot-rolled noted in October 2018.
Tata Steel, Sajjan Jindal-led JSW Steel, Naveen Jindal-led Jindal Steel & Power and state-owned Steel Authority of India (SAIL) are among the top steel producers in the country.
Meanwhile, some industry officials were of the view that customs duty levied on consumer durables in the 2020 Union Budget for FY21 could bring in mild demand in the market for steel.
Of the total domestic steel demand, majority comes from the infrastructure sector followed by the auto industry. A marginal part of about 10-12 per cent of the total steel consumption goes towards consumer durables.
According to Joint Plant Committee data, during April-November, India’s domestic steel consumption stood at 66.5 million tonnes, up 3.65 per cent from same period last year, while production was at 67.66 million tonne, up 2 per cent from last year. Industry officials are of the view, that the next two-three months would be very crucial for the domestic steel industry to test if the risen prices are sustainable, as the strong consumption period will continue until May.