Teji Mandi Explains: Steel price heats up, further hike expected

The steel price hike has inflated since May after a rebound in Chinese steel futures. Now, India is also mulling at a price hike to avoid losses and help companies stay afloat. Earlier, the Indian steel companies had shot up the price of hot rolled iron by Rs 4,000 to Rs 67,000/tonne. Jefferies' report says that flat steel/coated products will see a price hike of Rs 3,250-10,000/tonne in the coming week.

Reason Behind the Steel Price Hike

The speculation in futures and spot trading platforms in China are the major reasons. Meanwhile, the market’s anticipation of limited iron ore supply is also pushing up the prices. Hot-rolled coil (HRC) and cold-rolled coi​​l (CRC) are used in steel industries such as auto, appliances, and construction. The prices of vehicles, consumer goods, and construction costs are bound to be affected by the rise in steel prices.

Future Expectations

Jefferies in its recent report indicates, steel prices could further move higher in early June. The current price is moving up for flat steel and increasing the gap between long products and HRC. This could push up prices for long products, said the report further. Another report by Credit Suisse mentions that global ore prices could decline in the second half of this year. While domestic ore prices will not correct as much due to an increase in mining cost.

Closing Comment

The surging steel prices will be a big blow to the manufacturing space. Indian Pipe Manufacturers Association (IPMA) has asked the government to intervene. IPMA has further requested to impose a temporary ban on steel export. If implemented, it will be a big help to the sector.

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