Price Hikes To Improve Steelmakers’ Profitability In Current Quarter

Indian steel producers could see higher profitability in the current quarter after hiking prices in May even as raw material prices fell.

Domestic producers have hiked prices in the range of $10-15 a tonne, according to reports from Deutsche Bank Markets Research and Macquarie Research. Prices of hot-rolled coil increased 14 percent over the last six months and is trading at a nine-year high, both brokerages said.

Prices had been increased in the range of Rs 750-1,000 a tonne, Sourabh Shah, a wholesaler of steel and stainless steel told BloombergQuint.

The price hikes are in line with the global trend as producers hiked prices for the second consecutive month amid shrinking inventory. Shanghai Steel Rebar prices increased nearly 8 percent in the past month, the biggest hike since January this year. Globally, steel prices rebounded about 13 percent from their March low.

“China's steel inventory data has seen a decent drawdown in the last three weeks both at mills and traders, confirming the healthy demand picture,” Macquarie said in its report.

In India, prices have been on an uptrend since November 2017. Macquarie estimates prices to increase 4 percent sequentially in the first quarter of 2018-19, assuming rates hold steady in June.

Raw Material Prices Decline

The price of coking coal, a raw material in steel, continued to decline globally over the last one month, falling 8 percent month-on-month to $180 a tonne. It declined 25 percent sequentially to $195 a tonne and slipped further 8 percent so far this quarter, according to Bloomberg data.

NMDC Ltd., the country's largest iron ore miner, reduced its prices for fines and lumps in mid-April by Rs 100 a tonne to Rs 2,560 a tonne and Rs 2,900 a tonne, respectively, the sharpest cut since October 2017. Iron ore prices, however, rose 6 percent month-on-month to $67 a tonne.