Besides a spurt in demand, industry players attribute the increase in steel prices to a 17 per cent increase in iron ore prices by NMDC.
Among the large steel producers, JSW Steel is the only player that buys ore from state-owned NMDC, while most other producers have captive source of ore. Besides, a majority of NMDC’s iron ore is lifted by the domestic sponge iron industry.
The consumption of finished steel in India grew 7.9 per cent during April-December 2018 as against 7.5 per cent in the corresponding period a year ago, a CARE Ratings report said.
“There is no appetite to absorb so many price hikes but there is no option. With imports curtailed, consumers have no choice but to rely on domestic steel,” said a Mumbai-based dealer.
On the other hand, domestic steel prices are likely to remain 5 per cent lower (on an average) on a year-on-year basis during FY20, considering that the input cost remains stable, said CARE ratings. However, an increase in domestic consumption during FY20 is expected to restrict any sharp fall in domestic steel prices, it said.
"Domestic consumption of steel is expected to rise in the range of 5.5-7.5 per cent during FY20. We believe the consumption of long steel products to grow at a faster pace compared to flat steel products during the year mainly on account of the government’s focus on India’s infrastructure," said CARE Ratings.
For FY19, the revised capital expenditure by the Union government was higher by 20.3 per cent to Rs 3.2 trillion y-o-y; Rs 3.4 trillion has been allocated by it towards capital expenditure for FY20.
Long steel products are used in infrastructure and construction, while flat steel finds wide application in the auto industry.