Tumbling Steel Prices – What Does it Means for India & China:
The party for steel companies that have enjoyed a long bull run seems to be ending. Prices of the hot-rolled coil have now touched Rs 44, 000 a tonne in December 2018 the lowest in India in a year. In China, which supplies more than half of the world’s steel and whose economic activities drive global steel dynamics, prices have fallen 12% in the last 2 months. The decline was steepest in November 2018.
Why are the Steel Prices Going Down?
A slump in demand from China, rising trade tensions globally post US Presidential elections, as well as emerging signs of a slowdown in global economies, weigh heavy on steel prices will remain under pressure in 2019.
According to the global brokerage house, Haitong, “The reason for falling prices of steel in China is due to lower-than-expected winter shutdown in the US.”
The ‘Concerning Future’ of Steel Industry in India & China:
According to commodity research house, Argus Media, “if weakness extends through 2019, Indian mills could struggle to win customers in export markets as they run up against cut-price Chinese competition, pressuring domestic prices and profitability, ”
According to ICRA Report, 2018, “Expectations of lenient production curbs in China during the winter months and rising steel output amid a seasonal moderation in demand have led to a steep correction in Chinese steel prices in November 2018.
The threat of cheaper flat steel imports to India in the near term has increased and, as a result, domestic flat steel producers may have to brace for a downward revision in prices, especially in the fourth quarter of this financial year, the Icra report said. However, if China makes further tax cuts and accelerate infrastructure building and urbanisation projects next year, steel consumption might grow, it added.
Argus Media say that “the proposals approved by Chinese President Xi Jinping could be read as an effort to support economic activity.”
According to Mr. Jayanta Roy, Group Head, Corporate Sector Ratings, ICRA “One of the main reasons for a sharp correction in Chinese hot rolled coil export prices is the ongoing oversupply concerns in China during winter, leading us to believe that seaborne steel prices would remain soft in the coming months. However, a typical pick-up in Chinese demand post the winter months is likely to lead to a recovery in international steel prices in the next fiscal, ”.
According to research house, Motilal Oswal, “Even as steel prices are trending down in the international market, they were holding up well in India. But that edge may go away soon.
According to Mr. Jayanta Roy, “The steep reduction in international steel prices recently would make steel imports cheaper from January, when these shipments start hitting Indian shores would exert pressure on domestic steel prices in the fourth quarter.”
Rising Threat of Cheaper Flat Steel Import:
Prices of the hot-rolled coil have now touched Rs 44, 000 a tonne in December, the lowest in India in a year. The threat of cheaper flat steel imports to India in the near term has increased; domestic firms may have to cut prices.
Content Courtesy: power2sme.com