|Hot-rolled coil prices in Mumbai have declined 10% since July, when imports started rising, to about Rs34,000 a tonne, excluding taxes. Photo: Bloomberg|
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Wednesday, February 04, 2015
Steel makers poised to cut prices as imports flood market
Prices of hot-rolled steel may fall by more than 4% and may not recover for a couple of quarters, unless the govt acts to curb imports, analysts say Abhishek Shanker.
Mumbai, February, 2015: India’s largest steel makers are expected to cut prices to the lowest in almost a year to cope with a glut created by surging imports from China, Russia and South Korea.
Prices of hot-rolled steel, used to produce sheets, wheels, pipes and railway tracks, may fall by more than 4% this month to Rs.32,500 a tonne, according to the average of six estimates compiled by Bloomberg from industry executives, government officials and analysts. Prices may not recover for a couple of quarters, unless the government acts to curb imports, they said.
“The slowing Chinese economy is leading to higher exports from the country,” said Rahul Jain, a Mumbai-based analyst with CIMB Securities India Pvt. in Mumbai. “With surging imports, price cuts will happen at least in the near-term.”
Hot-rolled coil prices in Mumbai have declined 10% since July, when imports started rising, to about Rs.34,000 a tonne, excluding taxes. The rates for similar products in China tumbled 22% in the same period, according to researcher Beijing Antaike Information Development Co.
Earnings at Indian steel makers are already under pressure with Tata Steel Ltd, the top producer, expected to post its lowest profit in seven quarters for the period ended 31 December, according to the median of 20 analyst estimates compiled by Bloomberg. JSW Steel Ltd reported its lowest profit in five quarters in the three months ended 31 December.
“Prices of some of the imported steel products have come down to ridiculous levels and it’s forcing local producers to cut prices,” A.S. Firoz, chief economist at the steel ministry’s economic research unit, said on Tuesday by phone from New Delhi. “It’s a concern that our exports have fallen, while imports are flooding our markets.”
Imports accounted for 12% of India’s steel consumption in the nine months ended 31 December, compared with 8% in the same period year ago, according to steel ministry data. Local prices will remain restrained in the year starting 1 April due in part to higher imports, according to a 20 January report by India Ratings and Research Pvt., the local unit of Fitch Rating Ltd.
“There’s pressure from steel imports this quarter,” JSW Steel director Jayant Acharya told reporters at an earnings press conference on 30 January. “The Chinese surplus is coming out into the international markets and Russia’s ruble depreciation has facilitated their exports.”
Crude steel output in China, the world’s top producer, reached a record last year, while a fall in Russia’s ruble and a free-trade accord between India and South Korea has led to a surge in imports from those nations. India, which was a net exporter of steel last year, may become a net importer of 3 million tonnes this year, Firoz had said in January.
“At the current rate, imports may reach as much as 1 million tonnes a month,” Acharya said. India’s total steel imports rose 59% to more than 6.5 million tonnes in the nine months through 31 December from a year earlier, according to steel ministry data.
Chinese steel exports soared to 10.17 million tonnes in December from the previous month’s record of 9.72 million tonnes, according to data from the nation’s customs department.
India’s steel makers are lobbying the government to restrain imports by raising taxes on shipments from overseas suppliers and also implement a December order to ensure uniform quality of the alloy being imported.
The order makes quality certification from the Bureau of Indian Standards mandatory for imported steel products.
“We are requesting the government to look at enforcing the quality order,” Acharya said. “We also expect some changes in the duty structure either in terms of normal customs duties or tariff barriers.” Bloomberg.
Courtesy: Live Mint