Steel prices, even after June, are lower by about Rs 2,000 a tonne from end-March-level. "The appetite in the market has come back. Workers are also coming back, so construction activity is picking up," said Sharma
"In line with price fall in international prices, in the last two months there were price drops in the domestic market as well. In the last few weeks international prices have moved up by $60-70 per tonne on the back of better demand and elevated iron ore prices. Domestic prices are at a discount of 7-8 per cent to international prices which can be recouped in the coming months," said Jayant Acharya, director for commercial and marketing at JSW Steel.
Export prices rebounded to $475 a tonne in July after a subdued Q1, rising on Chinese demand. Infrastructure demand backed by fiscal support is the primary reason for strong demand in China.
Sushim Banerjee, director general of Institute of Steel Development & Growth (INSDAG), said international prices rose to due to China.
"In the US and EU, prices have flattened. In Vietnam, demand was stable while in Indonesia and Malaysia, it was increasing gradually," he added.
China's infrastructure investment is expected to increase by around 10 per cent year-on-year from a contraction of 6.3 per cent during January-May.
Chinese demand is good for Indian steel producers pushing exports to tide over muted domestic demand. In April-May, China
was the largest export destination for Indian steel mills with nearly a 48 per cent share.
However, with domestic demand picking up gradually, exports were likely to come down. Sharma said, during April-June, exports for JSPL were at 54 per cent. "In July, exports is at 40 per cent," he said.
Acharya said, "We were exporting about 50 per cent of total sales which over the next quarter will come down with better domestic orders . Improved demand is seen month on month now, especially in packaging, roofing and cladding, coated business, appliances, rural demand and construction in certain pockets."
He said that automotive production numbers had started improving and the recovery in passenger vehicles and two wheelers was better than anticipated.
Domestic consumption, it may be mentioned, increased by almost 13 per cent in June over May. Jayanta Roy, senior vice president of ratings agency ICRA, however, domestic demand for steel is still fragile, and was down by over 40 per cent in June in year on year terms.
"Near term demand outlook too remains weak, given the onset of monsoon, which will slow down the pace of execution of construction and infrastructure projects. Such projects are key to the growth of domestic demand to the pre-Covid levels. However, given the strategy of corporate sectors to conserve cash in the prevailing challenging environment, and tightness in the government's fiscal position, it is not certain to what extent new projects will commence in the near term. Demand from the automobile sector too is unlikely to provide much support," he said.
Roy, therefore, expects domestic steel prices
to remain under pressure, unless international prices increase significantly.
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