After a depressed price scenario that lasted for about six months, the domestic steel industry expects to see an increase in prices in the coming months on the back of a rising demand from the infrastructure sector.
In the last one year prices of steel have dipped 10-15%, but the industry believes that prices would firm up in both flat and long product segments in the coming weeks, as demand from industrial consumers like auto and consumer durables companies and the housing and construction industry is likely to pick up.
SAIL chairman CS Verma told FE that a slew of initiatives taken by the government to clear infrastructure projects would start generating incremental demand for steel over the next couple of months that could hopefully be sustained for most part of the year and even run into the next year.
“In last one year prices dipped by 10-15%. I don’t think that prices could dip further as it has stabilised in last couple of months. Growing demand will push up steel prices from now.”
At present, the price of benchmark hot rolled coil (HRC) steel is around R37,000 per tonne. Monnet Group chairman and managing director Sandeep Jajodia said, “After Diwali, steel prices and demand will grow by 5-7%. In last three weeks, auto sales have picked up which will give boost to the steel industry. New construction activities will pick up as monsoon season has ended.”
In the month of October, few public sector banks announced cuts of around 0.20% in interest rates for autos, with the rates now in the range of 10.45-10.75% for auto loans up to three years for purchase of new vehicles.
Country’s largest carmaker Maruti Suzuki India on Friday reported a 1.91% increase in total sales for October at 1,05,087 units, against 1,03,108 in the same month last year, signalling, according to analysts, an increase in sales in the coming months. Moreover, the government has also decided to increase the quantum of capital infusion in public sector banks by providing funds over and above the R14,000 crore budgeted. This, industry sources said, would encourage lending by banks and spur the purchases of autos and consumer durables in the ongoing festival season.
JSPL managing director and CEO Ravi Uppal said, “We see steel prices to increase by R1,000-1,500 per tonne in next couple of months as the demand picks up after the monsoon season.”
The steel industry registered a growth of 13.3% and 9.9% during 2010-11 and 2011-12 fiscals, but Indian steel consumption grew at only 5.5% during 2012-13 on the back of a slowdown in demand from its key consuming industries namely construction, capital goods and automobiles.