Mild steel futures may remain weak on sluggish demand

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Mumbai, Oct 8: Mild steel futures prices on the National Commodity & Derivative Exchange (NCDEX) may continue to rule weak over the next few days as raw material and international steel prices have been sliding sharply.

Mild steel October contracts fell sharply to Rs 27,020 per tonne on Tuesday from a recent high of Rs 37,610 per tonne quoted in mid-July mainly on reports of slowdown in construction industry.

"We expect the prices to move further down towards the lower level of our expected range of Rs 26,000 per tonne level. Prices are expected to fall more as raw material and international steel prices have been sliding down sharply. Moreover, with tightened domestic monetary policies, we expect that construction activity may slow down in near term," an analyst with Karvy Comtrade said.

Usually more construction activity is taken up from December onwards.

Demand from construction industry, a major constituent of steel applications, has been affected negatively due to tightened monetary policies and extension of south-west monsoon.

With inflation remaining above the comfortable zone, India's central bank has been taking measures such as increasing the reserve requirements and lending rates.

The comments from Indian steel minister that prices are likely to fall in coming months, tracking weak international markets, followed by primary steel producers announcement of reducing prices in October led to a sharp sell off on the futures platform.

The most heavily exchange traded steel product, mild steel ingots, was seen moving as low as Rs 27,330 per tonne from its previous month's level of Rs 29,450 per tonne.

International prices slid sharply in September due to weak demand from US, Europe and China.