Steel prices are unlikely to fall

Steel prices are unlikely to fall

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Domestic steel prices are unlikely to slide further and are expected to remain strong on the back of improving demand scenario, weak Indian rupee and stable global prices. However, one need to watch closely the progress of Monsoon which will decide the future course for the steel prices. Taking cue from global markets, NMDC has raised price of both lumps and fines in the domestic market by Rs 150/tn and Rs 100/tn, respectively. India steel demand rose 8% in Q4 FY 2018. It should be noted that steel demand had been registering a CAGR of 3% over FY12-17. Last month, international steel price remained almost flat, rising by 0.8% month on month to US$ 600/tn.

For long products, analysts expect price increases to be sharper than those for flat products as domestic construction activity remains robust. Historically, long products have traded at a 4%-5% premium to flat products. However, long products are currently trading at a discount to flat products. With stronger domestic activity, it is expected this discount to disappear in the medium term. 

However, coking coal prices went up due to concerns over supply shortage likely to arise due to Australian rail freight operator Aurizon’s new maintenance plan. Also, supply disruption is anticipated from Canada which is the 3rd largest exporter of coking coal globally. It may be noted here that the union members representing Canadian Pacific Railway staff served a notice to go on strike. According to analysts, price of Coking Coal may remain elevated at least till Sept 18 unless the logistics-related problems are sorted out earlier. Most of the domestic steel makers use coking coal in the production of steel.