Domestic steel makers are in a spot of bother as prices of Chinese steel products have witnessed a significant drop over the last few months and continue to fall. According to industry sources, domestic steel manufacturers have had to slash prices by around 15% in the last three months due to the onslaught of Chinese steel into the local markets.
Sources said that while domestic steel - especially rebars, which are used widely in the construction sector - is now available at around Rs 40,000-42,000 per tonne, the Chinese products are available at around Rs 34,000-36,000 per tonne.
"Rebars are widely used in the construction sector and there are a lot of imports from China, due to which market prices have come down drastically," said a senior official of Rashtriya Ispat Nigam Limited (RINL). "Apart from the oversupply of Chinese products, the recent devaluation of the Chinese currency -- Yuan -- is also set to push down prices further," he said, adding that the central government needs to impose higher import duty on Chinese goods, failing which it would be difficult for domestic steel makers to sell their products. "Despite domestic players cutting prices by 15%, there is still a price difference of around Rs 6,000 per tonne, making it a very difficult market for domestic steel producers," he added.
However, Steel Exchange India Limited director VV Krishna Rao said that though falling steel prices are a matter of concern, the simultaneous drop in iron ore and coal prices have somewhat eased the burden on steel makers. "Due to a drop in iron ore and coal prices, the domestic industry is managing to survive," he said.
At the same time, he said that infrastructure projects from the central and state governments needs to kick-start growth in the sector. "Prices have been falling over the past six to eight months now, but the domestic market is not looking up as state and central governments are not participating in and spending more on infrastructure. Even banks have to be liberal in terms of loans so that construction activity gets a boost. This is the perfect opportunity for consumers cash in on the drop in steel prices to construct houses," he added.
Meanwhile, despite steel prices falling by around 15%, builders are not happy with the existing cement and sand prices. Credai Vizag chapter secretary B Srinivasa Rao said, "The steel component has dropped by 10%, but sand and cement cost has increased tremendously. Previously, we used to purchase cement at Rs 250 per 50 kg bag, but now it is around Rs 350-370 per bag and sand prices have also doubled. So there is no relief for the construction sector and the burden is falling on the customers."
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