Steel Prices Inching Up In India

Nobody in India’s steel sector quite knows how to react to this bit of news.

A report in the Business Standard has said there’s been a small but perceptible upward increase in the price of Indian steel.

How’s that? Coming on the heels of a stable outlook report on the Asian (including Indian) steel sector for 2013 by ratings agency Moody’s, this new development is being seen as a logical effect of the rise in steel demand in India.

The news report quoted an unnamed steel sector analyst as saying there had been a demand push lately and this had led to the price hike. On average, the increase has been about 6 percent in both flat and long steel products on a year-on-year basis.

It was only in November this year that analysts had seen such a hike coming, though given prevailing market conditions, many had smirked behind their backs. The analysts had based their outlook on the fact that Indian companies would follow the recent mark-up in global steel prices.

One report said hot rolled coil (HRC) prices had risen by US $55 a ton across countries, except European ones in the second half of November. The controversy-ridden ArcelorMittal, one of the largest producers of steel in Europe, also had recently increased prices by US $51 to US $640 a ton.

So, logically, would Indian companies be far behind? The kickstarting of the economy by the Indian government with the approval of foreign direct investment (FDI) in retail is being viewed as the spark of a fresh spurt in infrastructure. Some research firms like Edelweiss feel there were signals of an end to the slowdown in the metals sector, indicating that the worst was over.

If you were to have asked whether steel prices would increase this November, people would have laughed in your face. Steel prices in India had fallen to Rs 33,375 a ton (about US $612) in November from Rs 35,000 (about US $642) last month. But mid-December, and suddenly, things look bright. Steelmakers including the state-owned Steel Authority of India Ltd (SAIL) have confirmed that there had been an increase in demand in recent weeks, enough for some steelmakers at least to nudge prices just a little bit upward.

One direct outcome of flat steel prices going up a bit is the effect on Indian automobiles. Flat steel is chiefly used in making cars and consumer durables like refrigerators. Some leading Indian carmakers have raised prices recently, one reason being a hike in the cost of flat steel.

The only downside could be the appreciation of the rupee against the US dollar. If it continues, it will make steel imports cheaper and restrict any sharp rise in prices by domestic producers.