Buoyant global rates to support domestic steel prices amid possible moderation in demand: ICRA

By: |
March 31, 2021 5:12 PM

Despite the possibility of a demand moderation, ICRA expects domestic steel prices to remain elevated on the back of favourable international price trends.

"Given the elevated Chinese export HRC price level of USD 768/MT and a recent spurt in ocean freight rates, the landed price of imported steel from China is 10 per cent costlier compared to domestic HRC prices."Given the elevated Chinese export HRC price level of USD 768/MT and a recent spurt in ocean freight rates, the landed price of imported steel from China is 10 per cent costlier compared to domestic HRC prices.

Domestic steel rates are likely to remain elevated on the back of favourable international price trends despite a possible moderation in demand in the near term, rating agency ICRA said on Wednesday.

Buoyancy in international steel prices kept Indian steelmakers’ export volumes high in February 2021 with a year-on-year and month-on-month growth of 15 per cent and 25 per cent respectively, a trend which ICRA said is likely to continue in March 2021 as well.

According to ICRA, India’s steel consumption growth is expected to moderate in the near term due to a surge in the number of new COVID cases and increasing mobility restrictions.

Despite the possibility of a demand moderation, ICRA expects domestic steel prices to remain elevated on the back of favourable international price trends.

“In terms of demand trends, it is to be noted that contraction in domestic steel consumption has been much lower at 9.9 per cent in 11M FY2021 compared to a 19.6 per cent drop witnessed during 8M FY2021 on the back of a sharp pullback in demand during December 2020 and January 2021,” ICRA said in a statement.

Steel demand in February 2021 reported a month-on-month decline of 7.6 per cent as elevated steel prices kept some of the end-users in wait and watch mode.

“Given the elevated Chinese export HRC price level of USD 768/MT and a recent spurt in ocean freight rates, the landed price of imported steel from China is 10 per cent costlier compared to domestic HRC prices.

“As a result, even if the domestic steel consumption moderates in the coming months, we do not expect domestic steel prices to fall drastically from the current levels,” Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA, said.

With respect to international trends, despite the second or third wave of COVID-19 hitting many key steel consuming geographies in recent months, with a crude steel production growth of 6.8 per cent in January 2021, China continued to drive the world steel production growth and kept it in a positive territory at 4.8 per cent.

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