Steel prices in India have nearly doubled over the last year, reflective of rising steel prices across the globe.
But for India, several factors such as a steep rise in the prices of raw material like iron ore — and of late, coking coal — have contributed to the steep hike.
Due to China’s decision to cut steel production and exports, India is also experiencing a price increase. High domestic demand had led China to remove rebates and impose export taxes on certain steel products this year to discourage exports. Steel production is also set to be capped in order to reduce carbon dioxide emissions.
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Indian steel prices on the rise
India’s steel industry has been impacted by the price hike in various ways.
For some major steel manufacturers, it has led to large profits. For many small and medium enterprises that manufacture steel and engineered products, it has led to losses.
Protests have been lodged with the Indian government due to the shortage of raw materials. After China, India is the world’s second-largest steel-producing country. The price escalation in India started in the second half of 2020-21 and has continued nearly unabated since then.
In June, for example, the wholesale price of hot rolled coils (HRC) shot up by approximately US $40 (Rs 3,000) to be approximately $1,533 (Rs 69,000) per ton. Cold rolled coils shot up by about $66 (Rs 5,000) to sell at approximately $1,146 (Rs 86,000) per ton. Prices of both HRC and CRC were nearly half in the same period in 2020. These forms of steel are used in the automobile, construction and transport sectors.
Because it is steel, the price hike has had a cascading effect on consumer goods, construction and other activities, too.
Steel plants in the country have hiked steel prices by around $80 (Rs 6,000) per ton in just the last eight days.
CNBC TV18 reported JP Morgan India was of the view that Indian steel prices were still about 15% discounted to imported steel prices. When the busy season post festivals, starts in India, post-festive season, demand could go up, leading to some increase in local steel prices.
The sudden rise in steel demand once the COVID lockdown had ended caught Indian steel companies off guard. The uptick in steel consumption along with a renewed focus on infrastructure and government initiatives (such as “Make in India”) have led to an increase in steel demand.
In 2017, as part of the national steel policy, the Indian government announced India would try to reach 300 million tons per year year of crude steel production capacity by 2030.
Furthermore, a local coal crisis, which some experts predict could last for quarters, has hit the steel sector.
Like China, India is also staring at a power crisis due to coal shortage. Over 70% of India’s power still comes from coal-powered plants.
As of Oct. 6, 80% of India’s 135 coal-powered plants had less than eight days’ worth of supplies left, according to BloombergQuint.
There are several reasons for the coal shortage. Among them, India has reduced its investment in the fossil fuel as it gives priority to renewable energy to meet its climate change targets.
BloombergQuint cited JSW Steel Ltd. officials, who have gone on record to state that the coal shortage is likely to lead to steel price hikes for the next few quarters.
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