Is steel price likely to be cut in July?

Steel prices are likely to see a downward revision in July 2021, according to metal analysts. Likelihood of global price cuts may impact the Indian prices as well. Russia is likely to impose an export tax from August and so there is a possibility of higher exports from Russian producers. Moreover, Chinese prices have seen a sharp correction and in line with that, Indian prices are also likely to see a correction.

There has also been a correction in export prices for India and that could reflect a lower price for steel. Moreover, India is getting into a seasonally weak quarter due to monsoons. During these months, construction activity in the country slows and as a result, long steel prices come under pressure.

Also, secondary steel makers sitting on inventory would put pressure on prices. Steel demand in India weakened due to the localised lockdown after the second COVID-19 wave. In the month ended May 2021, the consumption of finished steel recorded a sequential fall for the fifth consecutive month.

There is also an anticipation of the third COVID-19 wave and if that happens then buying could get postponed leading to more supply than demand.

Steel producers in India have been seeking a ban on the export of iron ore or a steep hike in export duty.   The drop in prices is likely as the consumption in the domestic market has been impacted by lockdowns. The domestic market will be influenced by a recent price correction in China.  

Between March and now, steel prices in India have been increased several times. The price rise is now also being fueled by speculation. So a correction in prices is more than likely.

Over the past year, NMDC has raised iron ore prices by 156% to Rs 6,560 per tonne, while the private miners have increased much more. Last year, India saw an export of 46 million tonnes of iron ore compared to 24 million tonnes  in the previous year. At the same time, domestic production of iron ore came down by 44 million tonnes to 202 million tonnes from 246 million tonnes in the previous year. As a result, the steel mills faced a shortage of almost 67 million tonnes, which led to subsequent rises in the price of the raw material, and thereby steel.

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