V R Sharma, managing director, Jindal Steel and Power (JSPL) said the Russia-Ukraine war will create a void of around 3.5 million tonne steel in the international market on a monthly basis. Benchmark hot-rolled coil (HRC) prices have already increased by over $150 a tonne or 15% in the international markets in the last 10 days. As imports turned costlier, domestic steel makers have recently raised prices by Rs 2,000-2,500 a tonne for various grades of steel. Another couple of hikes are likely soon, Sharma tells Surya Sarathi Ray in an interview. Excerpts:
How are domestic steel companies likely to benefit from the Russia-Ukraine war?
Prices in Europe have gone up by £100-150 per tonne in recent times to £1,150 a tonne. That has given a space for the Indian steel industry to sell more in Europe. We can ship steel at $1,150 a tonne, which is about $100 dollar less than the price in Europe. So, the Indian steel industry has a big opportunity for exports not just to Europe but also to the countries in the Middle East and North Africa (MENA).
How big a player is Russia in export markets?
Russia exports around 20 million tonne of steel per annum and Ukraine too has a similar level of exports. That has come down to zilch now. Even if the situation normalises today or in the next ten days, it will take at least six to eight months for them to restart exports. Steel from these countries used to go to Europe, North Africa and the Middle East. India’s exports to Europe and MENA countries is now around 10% of our total exports, we can now increase it to 20%.
Will the rising international steel price have an effect on the domestic steel price?
Yes, this is because the coal and iron ore prices are going up almost on a daily basis. Gas prices are also going up. So, the input costs have gone up. These are to be passed on, may be in two-three tranches. We have already increased prices, with effect from March 1, by Rs 2,000-2,500 per tonne. We are expecting another Rs 2,000 per tonne hike before March 10. We are requesting the government to see that iron ore prices don’t go up.
What is the current price of hot-rolled coil (HRC) in the local market? How will the market behave in the near future?It is Rs 68,000 per tonne in Delhi, in Mumbai and in Chennai. The price is Rs 67,000 a tonne in Kolkata. The price will cross Rs 70,000 per tonne soon. The price is including freight for the distributors.
How are steel imports priced? Import is not possible now. The gap in landed international HRC price and the domestic HRC price is about Rs 10,000 per tonne now. So, it is better for the domestic buyers if they buy steel from Indian companies now.
What will be your export prices now?It will be a minimum of $1,000 a tonne now, may be $1,100. Now it is $950-980 a tonne. It will go up by $100 per tonne in the next few days.
How is the domestic demand?Domestic demand is very strong now. The demand is coming from across the sectors – construction, buildings, pipelines, MSMEs. As Europe is disturbed, some are also looking for semi-finished products. However, due to the high energy and input costs, steel industry may not see a big rise in margins, but of course there is no shortage of orders. Mining sector is benefiting now since the cost of mining has not gone up.
So, you are very bullish on steel? Both domestic and the export markets are holding very high prospects. They will continue to do well in the next one year or so.
How is China going to benefit from the Russia-Ukraine crisis?China’s benefit will be as good as that of India. They will also try to export a lot to fill up the gap created by Russia and Ukraine. However, we are better placed than China on two counts. We have our own iron ore and if we have to supply to the Middle East or to Europe, then we are nearer to them.