Steel sector players are facing some heat owing to high input commodity prices as finished steel products have begun to decline since April after the Russia-Ukraine war broke out.

Share Market Live

NSE

Prices in the long products segment have declined on an average of 10-15 percent to Rs 57,000 per tonne in the Kolkata market from a high of Rs 65,000 a tonne. Coal which is a key raw material for the secondary steel producers has turned out to be the major pain point, officials said.

Steel prices from leading players were higher at Rs 75,000-76,000 per tonne at its peak. "Steel products, be it construction like TMT bars and structurals have come down between 10 and 15 percent 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 told PTI.

Also Read

| Higher coal imports may push power supply cost by 5% in FY23, says ICRA

"Our costs have increased by 50 percent 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", rating agency Crisil said in its latest report.

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.

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 percent 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.

First Published:May 15, 2022 5:39 PM IST