Domestic steel prices are expected to firm up by August due to an increase in raw material prices. Prices of iron ore and coking coal, key inputs for making steel, are expected to go up 23% and 12%, respectively. This would compel steel manufacturers to pass on the cost to maintain margins. Hot-rolled coil (HRC) prices currently rule at $575 per tonne in the country. During the last two months steel prices had declined in the range of 5-10%.
In June, steel makers had cut prices by Rs 1,000-1,500 per tonne on slackening demand ahead of the monsoon and global cues related to the European crisis. Steel secretary Atul Chaturvedi had expected steel prices to fall by another Rs 1,000 per tonne during July as construction activities are slow, but steel manufacturers have maintained the prices.
Tata Steel vice-chairman B Muthuraman recently indicated that steel prices are likely to further increase in the coming months with the cost of raw materials, especially coal and iron ore, set to soar from current levels. Several miners have planned to hike iron ore prices for the third quarter of the calendar year 2010, despite spot market weakness. ?Steel players especially JSW Steel, Ispat and Essar Steel will try their best to pass on the cost push, or else will face severe margin pressure,? said Ravindra Deshpande, an analyst with Elara Securities.
?NMDC has hiked prices by 11% for the coming quarter in a sign of buoyant volume demand from domestic steel producers. Even coking coal contracts have been settled at higher prices, forcing a cost push. From the past few days, prices in the international market have gone up, so I don’t see any reason for the prices to fall further,? said Anil Surekha, director-finance, Ispat Industries.
Japanese steel producers are expected to agree to a 10-12% hike in coking coal contract prices for the September quarter. Coking coal prices currently stand at $220 per tonne, whereas, contract iron -ore prices are $100 per tonne. JSW Steel director-marketing Jayant Acharya said, ?Currently, prices are stable and we expect them to improve. Things have bottomed out and affordability will become difficult if prices don’t increase. For July, we have maintained our prices, and for August, we will decide as per the market.?