Steel
industry operators are feeling the heat as a result of high input commodity
costs, as completed steel products have began to fall since the outbreak of the
Russia-Ukraine conflict in April. Prices in the long goods class have dropped
10-15% in the Kolkata market, to Rs 57,000 per tonne, from a high of Rs 65,000
per tonne. Officials say that coal, which is a critical raw resource for
secondary steel makers, has become a serious headache. Steel prices from major
participants were higher at their peak, ranging from Rs 75,000 to Rs 76,000 per
tonne. ”Steel products, be it construction like TMT bars and structurals
have come down between 10 and 15 per cent due to sluggish demand and are
expected to ease a little more before it settles. While our costs have soared,”
Steel Rolling Mills Association chairman Vivek Adukia.
Tata Steel MD & CEO T V Narendran, however, have a contrarian view and had
said recently that as far as “first quarter” of this year (FY’23) is concerned,
”we expect in India the prices to be Rs 8,000-8,500 per tonne higher
than fourth quarter which will cover the cost increases that we are facing due
to high coal prices.” According to Koustav Mazumdar, an associate director
with the agency, the onset of the weak demand season because of the monsoon and
less-lucrative exports mean domestic steel prices should begin easing and
ultimately move towards Rs 60,000/tonne by March 2023, down from the Rs
76,000/tonne peak it scaled in just last month, which will still be well above
the pre-pandemic levels. Adukia said steel companies are now forced to import
coal for survival as Coal India is not lending its ears to their
demand. ”As Coal India is not listening to our plea that coal
is “not” for fuel but a key raw material and so we should be treated as a
priority sector. We have approached the state government to speak to the city
headquartered miner on our behalf,” Adukia said. ”If coal prices in
the international market do not decline then 30-40 per cent of the secondary
steel units will have to scale down production or close down. There are about
65 secondary units in West Bengal and about one lakh employment is
associated,” he said.
”Our costs have increased
by 50 per cent despite a compromise on quality of inputs, secondary steel
producers using Direct Reduced Iron (DRI) require high quality
thermal coal to make sponge iron. The imported coal price which was USD 120 per
tonne had shot up to USD 300 per tonne after the war broke out. The price
is not sustainable unless passed through,” he said. ”Steel prices, which have
been on a song for the past two years, are finally set to correct on weak
seasonality, and may trade at around Rs 60,000 per tonne by the end of the
current fiscal year, down from the Rs 76,000 per tonne peak it scaled last
month.” A PSU steel maker without divulging details said there had been some
easing in the price of steel. ”Demand has gone up post-Covid because of a lot
of spending by various governments. At the same time, supply had not caught up.
So there is a reason why we have seen a very big increase in steel prices. Now
we are seeing a slight correction in steel prices,” JSW
Steel joint MD Seshagiri Rao had commented recently at
the ET Awards ceremony. He, however, said it was anybody’s guess
whether steel prices had peaked out.