A senior executive from another steel company said he expects demand to revive from January, with the government’s renewed thrust to infrastructure.
JSW Steel’s Joint Managing Director and Group Chief Financial Officer Seshagiri Rao had stated earlier that many steel firms were not making money at prevailing prices. He was, however, hopeful, following a series of measures announced by the government in September. “We have to watch out for the second half,” said Rao. He was, however, of the view that steel prices
have bottomed out.
Amit A Dixit, assistant vice-president, Edelweiss Securities, said, “We do not rule out further pressure on domestic prices because international prices are cooling off further and there are no signs of demand pick-up. Inventory build-up is yet another cause for concern, which is likely to lead to slow recovery.”
Exporting steel is one option to increase volumes as domestic prices are at a discount to landed cost. “We do not see the possibility of elevated imports. At the current level, domestic steel prices
are at a discount of 4 per cent to the landed price of imports from South Korea and Japan. Major domestic steel players are tapping export markets
as domestic demand remains lacklustre. Export realisations are also lingering at $423 per tonne, the lowest level since October 2016,” said Dixit.
Price outlook for raw materials is also on the wane. A source from Essar Steel quoted earlier stated, “Iron ore prices have softened, but the market is extremely volatile. The market is closely eyeing Chinese iron ore movement, where prices have dropped. Coking coal prices have also come down in the past six months.” This is expected to cushion the margins, but demand revival is crucial.
An industry observer said steel demand will recover when the auto sector turns around.