Today, Fitch Solutions revised its 2019 global steel price forecast downward to an average of $600 per tonne from $650. Prolonged weak investor sentiment on the back of the ongoing trade tensions between the US and China and increasing downside risks to the global economy continues to exert pressure on prices, it said in its report.
“Some portion of our inventory is surely up, we cannot deny that, but we are managing by picking up opportunities in certain pockets of the global market,” said Jayant Acharya, director (commercial and marketing) at Sajjan Jindal-led JSW Steel. “Also, in the domestic market, we are targeting water or oil pipeline project orders where (revenue) visibility is better,” he added.
JSW Steel, Tata Steel, state-owned Steel Authority of India (SAIL), Jindal Steel & Power and Rashtriya Ispat Nigam Ltd (RINL) are some of the large primary steel producers
in the country.
Meanwhile, China's steel inventories at ports, which reached an all-time low of 864,000 tonne in December 2018, has risen subsequently to reach 1.1 million tonnes as of August 2019. This is still, however, below the 10-year average inventory level of 1.9 million tonnes. China is the world’s largest maker and consumer of the commodity.
With the festive season round the corner in India, industry officials believe some portion of the inventory could drop in the coming months, lending slight support to prices.
“Select segments such as consumer goods should lift demand for steel in the country in the coming months. This may take domestic steel prices up to some extent, but only marginally,” said Banerjee.
On the global front, Fitch Solutions maintains a long-term view that steel prices will ease and embark on a multi-year declining track as fundamentals loosen with falling demand and increasing production.
"We believe that Chinese demand has further room to grow and outpace production in Q419 and 2020, as the government is now more likely to step up targeted stimulus for the infrastructure sector on the back of a more protracted trade dispute with the US. However, we are less positive than we were previously on steel prices in the coming quarters. This is because of the clear deterioration of the already strained ties between the US and China in past weeks, which will continue to hamper investor sentiment and global steel prices, especially as we see very low chances of a trade deal between the two countries being reached at least until the US presidential elections in November 2020.”
End-September through December is the festive season in India that pushes up consumer demand. Construction activity also picks up in this period as monsoons would have ended by then.
“Domestic steel prices are close to bottom. Here on prices should start to move up as even the government has taken measures to improve liquidity in the system,” said Nikunj Turakhia, director at Steel Users Federation of India (SUFI).