Mild steel ingots futures prices on National Commodity & Derivative Exchange (NCDEX) on Wednesday hit 4% lower circuit mainly on rumors that the government may cut excise duty on steel (current 14%) shortly.
NCDEX mild steel ingots April contracts prices were down by Rs 1,700 a tonne to trade at Rs 31,420 per tonne (till 5.15 pm) on Wednesday over previous day while May contracts also fell sharply to trade at Rs 32,680 on increased selling pressure.
“Futures prices have fallen sharply overnight on the market talks that government may cut excise duty on steel items. There is an uncertainty and the market is very volatile. On Tuesday, futures prices jumped up on the news that steel producers will increase their prices,” a local dealer said.
It can be noted that domestic spot prices of steel have shot through the roof past one month mainly on steep increase in major inputs costs i.e. iron ore and coking coal.
“I don’t think physical market prices will come down in the near term. In fact, there is a possibility of further price rise as international markets are on higher side. I think prices may increase even by more 20-30% in the short run,” JK Arora, president, Association of Secondary Steel Manufacturers, told FE.
During the month of March, steel prices extended its gains due to the rising demand in Asian countries like China and India along with the rising raw material prices. Prices of steel futures have jumped to Rs 35,100 per tonne signifying a net increase of almost 50%, since the start of this year.
He said that major input costs including iron ore and coking coal had gone up by nearly 200% and there is a supply problem. Steel producers should increase their capacities.
In the financial year 2007-08, the total finished steel production for the first ten months stood at 46.57 million tonne, approx. 94% of the previous production.