Kolkata:
Steel players are experiencing some heat from high raw material prices as finished steel products have started to decline since April after the war broke out between Russia and Ukraine.
Prices in the long products segment have fallen by an average of 10-15 percent to Rs 57,000 per tonne in the Kolkata market, from a high of Rs 65,000 per tonne. Coal, an important raw material for the secondary steelmakers, proved to be the biggest pain point, officials said.
Steel prices from leading players were higher at Rs 75,000-76,000 per tonne at its peak.
“Steel products, whether in construction such as TMT bars and structures, have fallen by 10 to 15 percent due to sluggish demand and are expected to decline a little more before settling down. While our costs have increased,” chairman Vivek of Steel Rolling Mills Association Adukia told PTI.
“Our costs have increased by 50 percent despite a compromise on the quality of the inputs. Secondary steelmakers using Direct Reduced Iron (DRI) need high quality thermal coal to make sponge iron. The price of imported coal, which is 120 dollars a ton had skyrocketed to $300 a ton after the war broke out. The price is not sustainable unless calculated,” he said.
“Steel prices, which have been slump for the past two years, will finally be adjusted for the weak seasonality and could trade at around Rs 60,000 per tonne, down from Rs 76,000 per tonne, by the end of the current fiscal year. peak it scaled last month,” rating agency Crisil said in its latest report.
A PSU steelmaker said without disclosing details that the steel price has eased somewhat.
“Demand has increased after Covid due to a lot of spending from different governments. At the same time, supply had not caught up. So there is a reason why we have seen a very large increase in steel prices. Now we are seeing a slight correction in steel prices,” he said. JSW Steel joint MD Seshagiri Rao recently at the ET Awards ceremony.
However, he said no one can guess whether steel prices had peaked.
However, Tata Steel MD & CEO TV Narendran have a contrary opinion and had recently said that as for the “first quarter” of this year (FY’23), “we expect prices in India to be Rs 8,000-8,500 per tonne higher than in the fourth quarter, which will cover the cost increases we face as a result of high coal prices.”
According to Koustav Mazumdar, an associate director at the agency, the start of the weak demand season due to the monsoon and less lucrative exports means that domestic steel prices should start to fall and will eventually rise to Rs 60,000/tonne by March 2023, a decline from the Rs 76,000/ton peak it reached in the past month, which will still be well above pre-pandemic levels.
Adukia said steel companies are now forced to import coal to survive as Coal India does not listen to their demand.
“As Coal India does not listen to our plea that coal is ‘not’ for fuel but an important raw material and we should therefore be treated as a priority sector. We have approached the state government to speak to the miner from the headquarters on our behalf” said Mr Adukia.
“If coal prices in the international market do not fall, 30-40 percent of secondary steel mills will have to phase out or close production. There are about 65 secondary units in West Bengal and employment is about one lakh.” he said.