Rising steel prices to hit the auto and real estate sector hard

Apr 2,2021

According to analysts, the ongoing rise in global steel demand, Chinese supply curbs, and strong iron ore prices would all contribute to another surge in domestic steel prices.

Motilal Oswal Institutional Equities on Thursday said, “We believe domestic hot-rolled coil (HRC) prices are likely to see two hikes in India: up to Rs 4,000 per tonne now and another Rs 2,000-3,000 per tonne in April.”

Anticipating HRC prices to go up by at least Rs3,500-4,000 per tonne in April, CARE Ratings on Tuesday added that “a Rs 4,000 per tonne hike will take domestic HRC prices to Rs59,000-60,000 per tonne, which would be the highest level seen since 2008.”

The continuing surge in global demand and tightness in supply due to supply-side issues and production curbs in China has helped regional steel prices in Asia inch up further, Motilal Oswal said, noting that regional prices have risen 5-7 per cent week-on-week.

“Domestic HRC prices at Rs 55,500 per tonne are trading at a discount of Rs9,000 per tonne to the landed cost of imports from Korea,” it added.

Steel prices in the world are at an all-time unprecedented high due to a steep increase in the prices of iron ore and due to the strong growth in steel demand from China, India, the US, Europe and other emerging markets, as global markets recover from a year-long slowdown with the reopening of business activities and vaccination drive, CARE said.

Domestic steel prices remained relatively low in 2019 as well as until October 2020, when they began a sharp upward climb. Prices corrected slightly in February, before continuing their rally in March and now April.

At Rs 55,500 per tonne, domestic steel prices have risen a steep 47 per cent since April last year, CARE noted, adding that the new rally will significantly hit the infrastructure and automobile industries. “The construction and real estate sector accounts for almost 55-60 per cent of total steel consumption followed by the auto sector, which accounts for 9 per cent. Most of the top automakers are expected to take a second price hike in the range of 1-3% in April, after already taking a 3-4% hike this year, to offset the effects of higher steel costs,” it said.

About the fact that steel customers are bracing for another blow, stocks of domestic steel producers such as Steel Authority of India and JSW Steel have been rising sharply in recent days.

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