Sucheta Dalal :Steel prices may not come down
Sucheta Dalal

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Steel prices may not come down  

May 6, 2010

 The Steel Authority of India (SAIL) has announced a price cut in long products. Are steel prices likely to fall in the coming weeks? SAIL’s price cuts are no indication of an overall fall 0069n steel prices, as the cost of future raw material imports is likely to go up.


SAIL had announced a price cut of Rs2,000 per tonne for its long products effective from 1 May 2010. However, this is not an indication of any future fall in steel prices. Taking the current raw material import rates into account— which have risen—steel prices are not likely to soften.


The import price for steel products in stock is around $650 (or Rs32,000) per tonne. Reportedly, this inventory at the import price of $650 is already out of stock. According to research reports, the current market prices for flat products are around Rs36,000 per tonne.


While the stock at the import rate of $650 per tonne has already run out, the current import rates for these products have increased. Import prices are hovering around a minimum possible price of $720 per tonne for most types of steel products—other than ss400 grade coils between 4mm to 12mm thickness. Even the ss400 coils are trading at a minimum import price of $690.


Ergo, steel prices are not likely to fall further as import prices for raw material are on a rise. Any change in the current steel prices will not match the raw material equilibrium at current import rates.


Going forward, raw material imports after May are likely to fall. This might again lead to panic buying, similar to the activity witnessed in March.


An industry source said, “International prices in flat products are not softening, but remain steady in India, as there is an overhang of imported inventory at low dollar prices held by small traders, which they are clearing in a panic. Raw material inventories are already subsiding.”— Amritha Pillay

-- Sucheta Dalal