Steelmakers mull another price hike in December, watching ore market

By: |
December 01, 2020 1:45 AM

NMDC’s chairman-cum-managing director Sumit Deb declined to comment on the probability of an increase in ore prices in December.

steel sector Budget 2021 Expectations, Budget 2021 Expectations for steel sectorThe Indian steel producers are bound to import graphite electrodes as almost 60 per cent of domestic production of graphite electrode is exported, creating a shortage in the domestic market.

Though the price of the benchmark product hot-rolled coil (HRC) soared to a two-year high of Rs 47,000 per tonne in November, steelmakers may revise prices upward again, citing the costlier iron ore, their main raw material. Though trading of steel in the domestic market now is at par with the landed cost of imports from Korea, a further hike in the steel prices will escalate the cost of building infrastructure and make white goods dearer.

“We have not decided. The price revision will depend upon the price hike iron ore miners bring into effect from December. If they raise the ore price by Rs 100, we will be forced to raise the steel price by up to Rs 200 per tonne,” said V R Sharma, managing director, JSPL. Sharma said if the iron ore prices don’t move, then plan to hike the steel prices will be put on hold. JSW Steel said it will be deciding on the price soon.

NMDC’s chairman-cum-managing director Sumit Deb declined to comment on the probability of an increase in ore prices in December.

According to the latest report by Motilal Oswal, domestic iron ore prices are at a five-year high now. For sized ore, a better variant than lumps, the price now is at around Rs 7,500 per tonne. Since August, the steel prices have been hiked by Rs 7,000-8,000 per tonne.

Domestic miners mainly take a cue from the state-run miner NMDC for effecting any revision in the price of the key steel-making raw material. NMDC had revised the price twice in November – first towards the beginning of the month by Rs 150 per tonne for both lumps and fines and the second one on November 17 by Rs 400/tonne for lumps and by Rs 300/tonne for fines.

NMDC’s lump ore, after the November 17 hike, now comes at Rs 4,000 per tonne, excluding statutory duties, taxes and levies.

“Buoyed by the rising global steel price and fuelled by a better than anticipated domestic economy, Indian steel prices have reached a level not witnessed in the last couple of years. This will surely lead to higher costs of steel-consuming sectors like infrastructure and construction, automobiles and consumer durables. Their working capital requirements will also increase,” said Jayanta Roy, Sr VP, ICRA.

Apart from the rise in iron ore prices, buoyant domestic demand (7.7% rise month-on-month in October), the below-normal production from the secondary steelmakers who generally contribute nearly 40% of the country’s total steel production and a good prospect for exports are keeping steel prices at an elevated level.

The trend is expected to continue till China devours all its steel in the domestic market leaving other countries which used to depend on China for steel to look out for alternate sources including India, the supply of iron ore becomes regular in the domestic market and secondary steel producers resume normal production.

Iron ore price by NMDC (In Rs/tonne):

*Prices are excluding royalty, DMF, NMET, cess, forest permit fee and other taxes

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