Steel prices up on construction demand

Last Updated: Fri, Dec 28, 2012 05:16 hrs

After several months of range-bound movement, prices of steel products have started inching up gradually in the Indian markets, amid expectations of resurgence in construction demand after the winter season. The market is mirroring the global trend, where steel prices are continuously rising due to higher cost of production on an upsurge in input cost.

Data compiled by Delhi-based OreTeam Exim, a leading research firm in ferrous metals, showed the MS ingot price shot up by Rs 00 this week in both southern and northern markets. With this change, ingots were quoting at Rs 32,700 a tonne in the benchmark Mandi Gobindgarh markets on Thursday. Similarly, MS billet prices in the same market surged by Rs 1,200 to Rs 32,100 a tonne.

Prices of steel products are quoted higher in India than in China. OreTeam data showed that MS billets in the Hyderabad spot market were quoted at $611 a tonne and Rourkela at $530 a tonne, compared with $517 a tonne in the Tangshan market of China. Similarly, rebar in Hyderabad was sold at $656 a tonne and Delhi at $826 a tonne versus $570 a tonne in the Tianjin spot market in China.

Steel price trend (Rs/ tonne)
Products Price& Change&& (Rs)
MS ingot 35,800 500-700
Billet 36,200 400-500
HR sheet 36,200 200-300
CR sheet 39,200 200
HR coil 35,800 200-300
CR coil 40,200 200-300
Rebar 40,100 300-400
& 27 Dec 2012; & &Change from previous week
Source : Mandi Gobindgarh, Punjab

"Steel prices are rising due to a rebound in regional demand from the construction sector. With the pending project set to get release of government funds before the forthcoming budget, the demand for steel is set to go up, going forward. But overall, the scenario is unlikely to see an exceptional boost in the further quarter from a lukewarm third quarter," said Anil Suraj, a producer and retailer of various steel products based in Mandi Gobindgarh.

Despite several restrictions imposed by various state governments on exports of iron ore, supply unfortunately have not increased in the domestic market as intended earlier. Consequently, the restrictions have resulted in closure of almost all private mines, leading to a supply deficit and a spurt in iron ore price in the domestic market. Since India remained totally absent from the iron ore exports markets, the price of the steel-making raw material has surged.

After a robust shipment of 117.3 million tonnes (mt) in 2009-10, exports of iron ore gradually plunged to 97.64 mt in 2010-11 and further to 60 mt in 2011-12. "During the current financial year, however, iron ore exports may not surpass 30-35 mt as no fresh shipment is expected anymore from India," said R K Sharma, secretary general of the Federation of Indian Mineral Industries.

The government raised the export duty on the steel-making raw material to 30 per cent in December last year from the existing 20 per cent, while freight on iron ore for domestic consumption was increased by 20 per cent early in March. However, export prices were reduced by 16 per cent. Again in the middle of this year, the railways raised freight rates. Exports, therefore, became unviable.

Apparently, Karnataka first suspended iron ore exports in July 2010, followed by Goa early this year. Some small shipments are taking place from Odisha but these are hardly noticeable. Consequently, the price of iron ore has surged to a near-six-month high.

According to the Steel Index, the benchmark, prices of 62-per cent grade iron ore hit a five-and-a-half-month high to $135.4 a tonne last week following stockpiles at major Chinese ports running at two-year lows of 73.15 mt.

A steel analyst said Chinese traders were taking advantage of a rapid rundown at port inventories and an improved expectation on China's economic growth to drive up prices by about 17 per cent so far this month. Globally, coking coal for delivery in January 2013 is quoted at $160-165 a tonne FOBAustralia, a rise of around $5 from December 2012.

More from Sify: