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Flat steel prices may be headed for correction prompted by global cues

After long products, global cues may prompt a price correction in flat products.

Long product prices were revised downwards by 5 per cent in November, said a major producer. A call on price correction in flat products would be taken in December but industry sources said there were indications the downward revision could be to the tune of Rs 1,000 a tonne or more.

In November, steel producers had tried to increase flat steel prices by Rs 1,000-1,500 a tonne but could not pass it. Prices ultimately were rolled over.

Globally, the sentiment had weakened, said sources.

US prices for hot rolled coils were at $940 in October and $920 a tonne in November compared to an intermediate high of $1,006 a tonne in July. Chinese steel prices have dropped from $590 a tonne to $510 a tonne.

“China cut steel production by over 50 million tonnes during the winter months of last year.

However, as per media reports, the local governments will be allowed to decide how to meet emission targets during the winter months this year. Therefore, it is difficult to estimate the amount of production cut by Chinese steel mills in FY2019, and the resultant impact on global steel demand-supply,” ICRA senior vice president, Jayanta Roy, said.

Domestic producers are therefore expecting more supply in the market than anticipated and believe the negative sentiment to drag through the fourth quarter.

Industry representatives also said while steel prices were on the softer side, inputs materials were still high.

Coking coal prices were at $200 a tonne compared to $180 a tonne, they said. Iron ore prices were at the same level. If the trend in steel prices and raw material prices continued then companies could face margin pressure in the third quarter.

On the demand side, however, the industry doesn’t think that there is much change in the scenario in the domestic market “The market is still holding,” said sources.

In the last three months, consumption has grown at 7.5 per cent, said Sushim Banerjee, Director General, Institute for Steel Development & Growth (INSDAG).

Trade tensions and lucrative domestic prices had led producers to focus on the home market. In fact, India turned a net importer in the first quarter after having been an exporter for the last two years.
Global Cues

• US prices for HRC has dropped to $920 a tonne, from $1,006
• Chinese prices have reduced to $510 a tonne, from $590
• In China, local governments have been allowed to decide how to meet emission targets in winter

Source: Business Standard

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