Steel Prices Rebound After Three Months

Steel prices in India rebounded from their lowest level in a year, cushioning the margin of steelmakers at a time global input cost hit its highest since 2014.

Indian steelmakers, tracking the rates globally, hiked the benchmark hot-rolled coiled prices by Rs 1,000 to Rs 42,900 per tonne in February, according to Edelweiss Research. Steel prices have been falling for three months and hit their lowest in nearly a year in January.

Globally, steel prices surged as cost of iron ore—the key raw material in steelmaking—rose after a fatal dam disaster in Brazil. Vale SA—the world's largest producer of the bellwether commodity—closed some of its operations, impacting the production of up to 40 million tonnes of iron ore.

Steel prices in February were up by as much as $10 a tonne in line with the global trend, Seshagiri Rao, joint managing director at JSW Steel Ltd., told BloombergQuint after the third-quarter earnings of India's larger steelmaker.

Saurabh Shah, a steel dealer at Mumbai, said prices are expected to rise further in March.

Besides, prices of domestic rebar or reinforcing steel bars increased by Rs 1,800 a tonne month-to-date to Rs 36,400-39,100 per tonne, according to a report by Deutsche Bank AG.

The rise in steel prices is expected to support product spreads, the difference between the cost of raw material and selling price, boosting the margin of steelmakers.

Also, Moody's Investor Service, that recently upgraded the rating for JSW Steel and Tata Steel Ltd., expects domestic steel prices not to fall further. It also said India's steel consumption is likely to grow at 5.5-6 percent annually over the next one to two years, aided by the government's infrastructure push and revival of demand in the automobile sector.

“Consolidation in India's steel sector and strong domestic demand, coupled with limited new capacities, are expected to keep the industry's utilisation levels higher and ‘pricing discipline' in check,” the rating agency said.