China supply cuts: Prices of rebar steel touch 7-year high

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Mumbai | Published: August 24, 2018 2:12:54 AM

The prices may rise by about 5% and then go up substantially in the last quarter.

steel, steel industryJSPL’s Raigarh steel plant is operating at close to 97-98% utilisation while the Angul steel plant is operating at 60-65% capacity utilisation.

With additional supply cuts in China, the prices of rebar steel have touched a 7-year high, which is likely to put pressure on the domestic prices, that may rise in next few months, industry players said.

While the demand for steel remains robust on the back of consumption coming in from infrastructure and affordable housing segment mainly, the supply constraints in India are expected to push up prices from next month onwards.

According to Naushad Akhter Ansari, chief executive officer, Jindal Steel and Power, the demand-supply gap is widening in India and that will push up prices in September.

The prices could rise by about 5% and then go up substantially in the last quarter, Ansari told a business news channel.

Calling the demand healthy, Ansari said that Indian steel prices have not peaked yet and there is room for increase.

Meanwhile, JSPL has lowered its steel volume expectations for FY19 as it now expects its DRI plant to start only after the Angul blast-furnace achieves 85% utilisation, according to analysts.

The challenges that the company faces around its product-mix poses a contraint to significant volume growth, analysts at Kotak Institutional Equities observed in a recent report.

“Deleveraging and improved assets sweating make for a good story, though we expect earnings to improve only gradually given the challenges of low PPAs in the power business and demand challenges for the steel product-mix,” they said.

JSPL’s Raigarh steel plant is operating at close to 97-98% utilisation while the Angul steel plant is operating at 60-65% capacity utilisation.

The management told analysts over a conference call that company expects the Angul blast-furnace to achieve plant utilisation of 85% or steel production of 270,000-300,000 tonne per month gradually by end of FY19.

However, this is lower than earlier guidance of 400,000 tonne per month by October 2018 and the expectation of 300,000-350,000 tonne per month of steel production till then, analysts said.

Ansari said that Jindal Steel and Power has ramped up the newly-commission Angul plant to meet the demand.

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