Crisil: Indian steel mills enjoy headroom for further price hike

Wednesday, 13 January 2021 11:44:45 (GMT+3)   |   Kolkata

Indian domestic steel prices are currently still 6-8 percent below the landed price of imports on average and there is still headroom for local producers to increase prices in line with global prices, a steel sector report issued by rating and research agency Crisil said on Wednesday, January 13.

Indian steel prices have defied predictions and increased through the December quarter as three tailwinds converged - high global prices, tight domestic supplies on account of the iron ore shortage, and healthy demand growth, the Crisil report said.

Accordingly, local steel producers have raised benchmark hot rolled coil (HRC) prices multiple times since August, with prices up 37 percent on year-on-year basis, Crisil said.

“We expect steel prices to remain high in the January-March 2021 quarter, with a sequential price increase of INR 7,000-8,500/mt ($95-115/mt ),” the rating agency said.

It said that the demand momentum should continue in the current quarter and that growth will also be bolstered by the statistical low base effect of the fiscal year 2019-20, and that will limit the contraction in steel demand this fiscal year to 9-11 percent, compared to Crisil’s previous forecast of a 17-20 percent decline.

On the raw material front, the rating and research agency said that Indian iron ore supply could not match demand from steel mills as only six or seven of the total 19 newly-auctioned mines in Odisha have been able to resume operations.

Of these, most were won by steel mills for captive consumption. The 19 iron ore mines used to sell 65-70 million mt commercially and hence the tight supplies following several mines failing to resume operations more than doubled iron ore prices from May-June 2020 levels. But despite the surge in the domestic iron ore price, it is still about 60-65 percent cheaper than the landed price of imports, Crisil said.

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