Domestic steelmakers are set to cut prices of hot rolled coils (HR), a base product determining the prices of various downstream products, by around Rs 1,000-1,500 a tonne. After this round, steelmakers would have slashed prices by up to Rs 11,000 a tonne since September, when prices started declining.
?Discussions among producers are on. It is felt that some further adjustments in prices are required. A final decision would be taken within a day or two,? an industry official confirmed to FE on condition of anonymity. The decision is expected to adversely impact the bottomlines of integrated steel producers. In the second quarter, only Tata Steel and Sail posted profits.
The decision to cut prices is a response to the withdrawal this month of a 5% export tax on flat products by China, the world?s largest producer. Global prices are expected to soften further as a result. Of the total world production of 1.3 billion tonne in 2007-08, China accounted for 490 million tonne, while India produced 56 million tonne.
Currently, domestic HR prices are at around Rs 32,000 a tonne after producers slashed prices by about Rs 4,000-6,000 a tonne last month. But as reported by FE, Indian prices are still around $100 (Rs 5,000) higher than landed imported prices. This is after the government last month re-imposed a 5% import duty on steel products to protect domestic producers. Steel industry analysts feel prices should now stabilise and start looking up by the first quarter of next fiscal.
To improve off-take from local companies, the government last month tightened import measures like disallowing traders to import products like HR coils. Only actual users with the requisite licence are entitled to import these products. Though the measure has been taken to discourage trading in imported items and help domestic producers reeling under the onslaught of cheaper imports, industry sources said that such measures are never fully successful.
That is because some small producers, who import steel products as actual users start trading if margins seem attractive. The commerce ministry has also initiated anti-dumping investigations into steel product imports from China, Japan, South Korea, the US and EU.
The present downturn in the steel industry is due to the declining demand from major consumers like the automobile, infrastructure and construction sectors, all of which are slowing down. Major international players like ArcelorMittal and Corus have cut production.
