Steel prices are expected to drop marginally in April with the rupee appreciating, the Chinese currency falling and weak international prices creating a downward pull. However, since input prices too have dipped in the past month, margins of top steel companies are not likely to suffer much, according to metal sector analysts.
While major project activity has come down to a trickle in what is usually the middle of the busy season in the steel market, a stronger rupee is making steel imports cheaper.
A fall in the Chinese currency is only likely to accentuate the threat of imports. The rupee has appreciated about 5% in the last two months, while the yuan has depreciated about 3%. "Steel prices are likely to soften in the first quarter with some improvement during the second half of the year," said Goutam Chakraborty, research analyst at Emkay. "The rupee has been a major support for the steel industry because domestic demand has been weak. Rupee depreciation restricted import to a large extent, giving an opportunity to domestic producers to maintain prices."
Steel companies such as JSW Steel, Tata Steel, SAIL and Jindal Steel have been increasing prices in the past six months to protect margins from rising input costs. But dealers and analysts say this was not passed on to customers given weak domestic demand . "Steel companies have raised prices in last few months but higher prices have only led to a slight improvement in realizations," Chakraborty said. "Also, barring last one and half months, global steel prices have remained stable. The scenario is now changing with the rupee rising. Global steel prices too are coming off from their highs."
Hot rolled cold steel prices have come under pressure from the strengthening euro and aggressive Asian export offers in Europe, according to a recent Motilal Oswal report. The Chinese steel market also showed weakness. Chinese steel prices were down 0.6% in the last one week. Weak international prices and rupee appreciation will put pressure on steel prices, said Giriraj Daga, senior research analyst, Nirmal Bang Securities. With the Chinese currency depreciating, China is likely to start exporting and prices will fall. Vamsi Krishna, research manager, Inditrade Derivatives and Commodities Ltd, pointed out steel prices will continue to decline because of over capacity and lack of demand from major consuming nations such as China. On the internal side, raw material prices have come down. Demand in China, the world's second-largest economy, is slowing just as output rises.
Globally, iron ore prices have significantly fallen to around $111 per tonne, so customers will expect companies to pass on the benefit. Price of lump ore from Odisha have fallen 3% or Rs 200 per tonne. Since most Indian steel companies import coking coal, they will benefit from the drop in coking coal prices too. "Overall, margins ideally should not get impacted," Emkay's Chakraborty said. Most steel companies ET spoke to said they would take a call on prices on April 1, while admitting that a $10-12 drop in international prices and China's slowing demand will have to be factored in. "As of now, our mills are booked to capacity for the next few months. However, the market remains tough," an executive at one the country's largest steel companies said.
Article taken from Times of India: http://timesofindia.indiatimes.com/...teel-prices-in-April/articleshow/32770728.cms
While major project activity has come down to a trickle in what is usually the middle of the busy season in the steel market, a stronger rupee is making steel imports cheaper.
A fall in the Chinese currency is only likely to accentuate the threat of imports. The rupee has appreciated about 5% in the last two months, while the yuan has depreciated about 3%. "Steel prices are likely to soften in the first quarter with some improvement during the second half of the year," said Goutam Chakraborty, research analyst at Emkay. "The rupee has been a major support for the steel industry because domestic demand has been weak. Rupee depreciation restricted import to a large extent, giving an opportunity to domestic producers to maintain prices."
Steel companies such as JSW Steel, Tata Steel, SAIL and Jindal Steel have been increasing prices in the past six months to protect margins from rising input costs. But dealers and analysts say this was not passed on to customers given weak domestic demand . "Steel companies have raised prices in last few months but higher prices have only led to a slight improvement in realizations," Chakraborty said. "Also, barring last one and half months, global steel prices have remained stable. The scenario is now changing with the rupee rising. Global steel prices too are coming off from their highs."
Hot rolled cold steel prices have come under pressure from the strengthening euro and aggressive Asian export offers in Europe, according to a recent Motilal Oswal report. The Chinese steel market also showed weakness. Chinese steel prices were down 0.6% in the last one week. Weak international prices and rupee appreciation will put pressure on steel prices, said Giriraj Daga, senior research analyst, Nirmal Bang Securities. With the Chinese currency depreciating, China is likely to start exporting and prices will fall. Vamsi Krishna, research manager, Inditrade Derivatives and Commodities Ltd, pointed out steel prices will continue to decline because of over capacity and lack of demand from major consuming nations such as China. On the internal side, raw material prices have come down. Demand in China, the world's second-largest economy, is slowing just as output rises.
Globally, iron ore prices have significantly fallen to around $111 per tonne, so customers will expect companies to pass on the benefit. Price of lump ore from Odisha have fallen 3% or Rs 200 per tonne. Since most Indian steel companies import coking coal, they will benefit from the drop in coking coal prices too. "Overall, margins ideally should not get impacted," Emkay's Chakraborty said. Most steel companies ET spoke to said they would take a call on prices on April 1, while admitting that a $10-12 drop in international prices and China's slowing demand will have to be factored in. "As of now, our mills are booked to capacity for the next few months. However, the market remains tough," an executive at one the country's largest steel companies said.
Article taken from Times of India: http://timesofindia.indiatimes.com/...teel-prices-in-April/articleshow/32770728.cms
