Going by the general consensus, steel producers in India are happy to have seen the tail end of 2013. Naturally, like (almost) all human beings, they expect 2014 to be better.
In the new year, despite some not-so-hot predictions made by some of the well-known analysts and big research houses like the PwCs and Moodys of the world, some Indian steel majors seem eager to push the price boundary. First off the block will be a leading domestic producer, JSW Steel. It has decided to hike rates by about US $16 per ton, around 2 percent across the board for January.
A report in The Economic Times stated that other leading companies including SAIL, Essar Steel and Tata Steel are also expected to hike the prices of their steel products in this month. The hike is mostly due to an increase in input costs, say analysts, something that was also acknowledged by JSW Steel Director of Commercial and Marketing Jayant Acharya.
Since last October many of the steel companies including JSW had either reduced or rolled over the prices due to subdued demand. Now, they can no longer hold on.
Domestically, there are two quarters of 2014 that the steel industry in India is looking forward to, where demand is concerned.
One is the first quarter where historically steel demand has always picked up, probably because of meeting annual targets before the end of the fiscal year. The other this year is the last quarter, much after the country’s national elections are over, when steel majors expect demand to soar as the economy gets back on the rails.
Both, PwC and Moody’s, along with other analysts, have not predicted a very hot 2014 for Indian steel. Both have said profits of companies may hit historical lows.
Indian steel companies are keeping their fingers crossed, hoping against all hopes that the predictions may be proven wrong. Aiding them is a small revival seen in the rural markets lately. Some export-based manufacturing industries, and also agricultural ones are looking at consolidating their exports to the US, where the economy looks to be reviving.
A report in Live Mint talking of an “industry revival” quoted an unnamed spokesperson from India’s fifth largest steelmaker Jindal Steel and Power Ltd, who said in the next two months new capacities were being commissioned that are set to more than double the existing 3.5 million tons of capacity by March 2014. The report quoted analysts as saying the sentiment for steelmakers had improved with the trends in the consuming sectors. Some Indian auto companies, too, had announced price increases.
As the days of the new year go by, the picture will get even sharper, and it will then be known whether the cautious optimism portrayed by Indian steel companies was right or whether the negative forecast of research houses at the start of 2014 was actually proving to be true.
What This Means for Metal Buyers
Having held on for some months, Indian steel producers are all set to hike prices of their products in the new year. For consumers, it means shelling out that much more for steel in the new year, while for steel companies, it means a slight increase in their bottom lines.