With imports hit by coronavirus outbreaks, domestic producers see increased demand as opposed to expectations of a drop in metal prices due to coronavirus impact steel companies have increased hot-rolled coil prices for the sixth time in a row, by Rs 500-750 a tonne, to Rs 39,200. The price increase will come into force on 1 March.
The coronavirus scare has basically shut down cheap steel imports from China, Japan, and Korea. Robust orders from infrastructure projects have increased domestic demand. In addition, some steel end-users are willing to pay any price to build a sustainable inventory with domestic supplies, as the import uncertainty is likely to persist for a long time.
Jayant Acharya, JSW Steel Director (Commercial and Marketing), said that despite the present hike, steel prices in India are at discount to the landed cost of imports, and 8 percent lower against March 2019 prices.
Moreover, he said, the prices of iron ore globally have firmed up to $90 per tonne, while coking coal has moved up to $160 per tonne from $130 due to the distribution of supplies. In reality, pre-ordered shipments of steel from abroad have already arrived and people are afraid to place future orders due to the possibility of coronavirus contamination.
Steel prices in India went down freely last year. From Rs 48,000 a ton, they dropped to Rs 34,000 last September, before shifting from October on the back of the government's economic stimulus to infrastructure and numerous other sectors. Rates were raised twice in January to narrow the gap between lower domestic and import prices.
Even when steel companies were increasing prices on buoyant domestic demand, low-cost imports slowed down the pace of hike. Indeed, some domestic importers are now willing to adopt a cash-and-carry model for domestic supplies, said a senior steel company executive.
On the other hand, China has accumulated a large inventory as its demand from the infrastructure automotive and white goods sectors has come to a standstill and the export outlook has decreased, Acharya said.
Decreased exports from China have opened India's export opportunities, especially to some of the SouthEast Asian countries, he said. To order to meet the March-end deadline, some of the infrastructure projects to India have put huge orders, though demand from the auto and white goods sectors is showing signs of recovery, he added.
In the automotive sector, the market for commercial vehicles remains low and may soon pick up as economic activity increases, he said.
As regards the possibility of coking coal imports from Australia by steel companies being struck by a virus attack, Acharya said: "Supplies are coming in as of now, but we are keeping a close watch on them and the only issue is the supply of ferroalloy."