Steel prices expected to drop as Chinese export prices fall
After a persistent rally, domestic steel prices should finally decline with a sharp drop in Chinese benchmark export prices.
In addition, domestic demand slowed in the face of expectations of lower prices in the coming months.
Jatin Damania, Vice President (Fundamental Research), Kotak Securities said domestic steel prices are expected to decline in the coming months as current domestic prices are above import parity. Chinese HRC prices fell 20 percent last month.
Margins of steel companies
The margins of Indian steel companies could be under pressure due to high coking coal prices and the expected decline in steel prices, he said. Steel companies have also reduced their exports with the drop in world metal prices.
After peaking at $ 939 per tonne in September, Chinese steel prices are down and hit $ 750 last month. It fell again in November. However, in India steel prices have increased due to rising coking coal prices and logistics costs.
Port quarantine in China
The supply chain crisis is expected to worsen with China’s implementation of a seven-week port quarantine, further delaying the full recovery of the shipping industry.
In an attempt to control the Covid virus, China continues to ban crew changes for foreign crews and recently imposed a mandatory seven-week quarantine for returning Chinese sailors. Even ships that have renewed their crew elsewhere must wait two weeks before being allowed to embark in China.
To comply with these standards, shipowners and managers have had to re-route vessels, delaying shipments and crew changes, exacerbating the crisis in the supply chain.
Also read: Steel prices could drop everywhere except the United States
Last month, the domestic price of hot-rolled coils was increased by 3,500 yen per tonne to 69,600 yen due to rising coking coal prices, while prices for TMT bars remained stable at 48,525 yen per ton.
However, since early November, world prices for steel and iron ore have tended to decline due to weak demand. In fact, steel prices are currently trading at a low of around eight months.
Sensing that Indian steel prices will also follow a similar downward trend with a lag effect, some of the major steel consumers have postponed new orders and prices are expected to drop next month, said a CEO of major steel. steel company.