Coronavirus outbreak may rein in India’s steel price rally

KOLKATA: The global Coronavirus outbreak is likely to rein in the rally in domestic steel prices, in step with global steel prices which have sharply declined from January highs.

Although domestic prices have been trading at around 7% discount to landed price of imports, with Chinese mills resuming production, the pricing power of domestic steel majors may be be restrained going forward, analysts have said. The rising number of global cases of Coronavirus may curb steel exports from India, CARE Ratings said in its latest report.

Domestic steel prices started to inch upwards from mid-November in line with the international prices. Over the next three months, prices rose by 9% due to lower inventory levels, restocking demand and expectation of revival in economic growth on government measures.

However, the spread of Coronavirus worldwide has led to some pull back in prices. International steel prices started to decline from mid-January onwards.

Disruptions in Chinese steel production was expected to reduce threat of Chinese exports and provide domestic players an opportunity to raise domestic prices and increase exports.

However, the number of cases in China has gone down considerably while it has increased in other parts of the world. Therefore, there is fear of build-up stocks from China entering the world market and further depressing prices. “Any supply glut from China due to slowdown in Chinese demand may adversely impact global steel prices due to sizable share of China in global steel production, consumption and seaborne trade,” the CARE report said.

Despite a halt in manufacturing activities to a large extent, China’s crude steel output for January and February rose by 3.1% to 154.7 million tonne, as per data from the National Bureau of Statistics (NBS).

“Indian steel prices have so far remained less affected by the situation in China. But eventually we too will feel the pressure on our prices,” Rohit Sadaka, director, India Ratings said.

India’s finished steel production grew by just 2.2% to 94 million tonne during April-February FY20 due to lower demand mainly from automobiles and consumer goods segment. Import of finished steel fell by 10.4% during April-February 2020 compared to last year.

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