Falling demand to control soaring steel prices
Due to Covid-induced restrictions, the industry has suffered. When compared to March, finished steel consumption was down 23% last month, at 6.78 million tonne (mt). Steel consumption is expected to fall in the June quarter compared to the March quarter.
However, it will still be higher year on year because the country was completely shut down in the June quarter of last year. The second wave is expected to have an impact on auto and consumer durable demand, as well as delay construction and infrastructure activities.
However, strong export demand and higher international prices would allow steel producers to increase export levels, although high freight and shipping costs and container availability could be areas of concern, India Ratings said.
Domestic hot-rolled coil prices increased 3% month on month and 78% year on year in mid-May to Rs 65,250 per tonne. Similarly, domestic rebar prices rose Rs 3,000 per tonne month on month to Rs 56,000 per tonne in May. Steel prices rose as a result of increased export orders, which resulted in lower supply within the trade segment, strong global demand, and high international steel and iron ore prices.
However, domestic demand is likely to be subdued as a result of the lockdowns and increased infection rates, affecting auto and consumer durable demand, it said.
The recent drop in Chinese futures prices may have a short-term impact on India's export orders and domestic prices. Given the Chinese government's efforts to control steel prices and lower demand expectations as a result of the lockdown, domestic and international prices are likely to face headwinds, but would remain higher than pre-Covid levels, the rating agency said. In April, crude steel output was down 17% month on month at 8.3 mt due to steel companies diverting oxygen for medical purposes. On higher consumer demand, China's crude steel output increased 13% year on year in April to 98 mt. Despite the government's efforts to reduce annual output and reduce carbon emissions, output increased. In April, China's industrial output increased by 9.8 %.
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