Indian steel prices set to rise further on coking coal costs, demand revival

NEW DELHI: Indian steel prices are expected to rise further in the coming weeks as a post-monsoon pickup in infrastructure and automotive demand tightens the market while higher coking coal costs lift production costs of mills, executives and analysts said.

Higher prices could help mills recover margins squeezed by surging coking coal costs, but infrastructure, construction and auto companies face higher input costs just as demand picks up.

Mills in India, the world’s second-biggest crude steel producer after China, marginally cut prices of products such as hot-rolled coil (HRC) by 280 rupees ($2.96) per metric ton between June and July, government data showed.

But HRC prices rose by 4,000 rupees per metric ton between August and early September to a four-year high, according to commodities consultancy BigMint.

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“We expect steel prices to increase by around 3,500 rupees per ton in the coming weeks,” said Vedant Goel, director at Enlight Metals.

Since coking coal accounts for a significant share of production costs, mills have been passing on the cost increase, said Shankhadeep Mukherjee, principal analyst for steel at London-based consultancy CRU.

The sharp price recovery has been supported by planned maintenance shutdowns at major mills, tighter spot availability and lean distributor inventories, BigMint said.

Further price increases are likely in the near term, supported by maintenance shutdowns, post-monsoon restocking, festive demand, project demand and higher coking coal costs, aid an executive at a large steel mill who was not authorized to speak to the media.

Pressure from imports

A significant increase in steel prices in the coming months is unlikely, however, as rising imports, especially from China, could limit mills’ pricing power, the executives said.

India imposed a safeguard duty on some steel imports last year to curb a surge in overseas shipments. It also launched an anti-dumping investigation in June into HRC imports from China Japan and Russia.

Despite the trade measures, imports have picked up.

India was a net importer of finished steel between April and July, while finished steel imports rose 36.6% from a year earlier, government data showed. China accounted for 31% of India’s imports, making it the largest supplier.

Higher imports remain the key risk to margins, if competitive pressure resurges, Fitch Ratings had said in a report on September 1.