However, based on historical evidence, this is unlikely to result in any significant increase in the realisations for companies, steel industry experts said. Even with an average price increase of Rs 3,500 per tonne between January and March, average realisation for the last quarter of the current fiscal year is expected to move up only by Rs 1,500 per tonne. This is because of the variance in price hikes and realisations that exist because of the heterogeneous nature of the industry that offers multiple products with pricing trends differing from product to product. A price hike is also due for companies rewriting their earlier contracts that were based on a lower base existed before December 2017.
“We see a broad-based recovery taking place in key markets like the US, Europe, China and Japan that is leading to a growth in steel demand,” Jayant Acharya, director of commercial and marketing at JSW Steel, told ET in an interview.
“We’re also seeing a similar possibility of capacity expansion investment similar to what existed in 2001, driven by recovery.”
Goutam Chakraborty, a metals analyst at Emkay Securities, also has a similar view. He expects the industry to see higher demand for the next one-and-a-half years.
In the domestic scenario, demand is being driven by automotive, construction and yellow goods production. JCB, a manufacturer of earthmoving equipment, has increased its production to 7,000 units per month from 4,000-5,000, said an industry executive, pointing to it as an indication of improvement in construction activities that is also pushing up the price of steel bars.
“There is still some steam left in the price hike,” said a senior official at a steel company, speaking on the condition of anonymity.
In fact, companies have been increasing prices by Rs 1,000-1,500 per tonne since December. But with the lag effect of earlier contracts, new contracts, especially with automakers, stand to see an increase in price by almost Rs 6,000 per tonne, the official said.
However, there are global factors that could dampen prices. Globally, prices have come down over the last one month with a fall in the cost of raw materials like iron ore and coking coal. Iron ore prices have fallen to $ 60 a tonne from around $ 70, while coking coal has become cheaper at $ 210 per tonne from $ 235.
“There is a sentimental softening at the global level even though the Indian scenario looks good,” Chakraborty said.
Another factor that could weigh on steel price is the US decision to impose tariffs on imported steel — exporters may look at fresh markets to dump their produce, hurting prices.
But industry players hope the US to exclude Japan, the European Union and South Korea and other allies from the tariff-based regime — that means steel products from those places will not come to markets like India. However, with the European Commission initiating a safeguard investigation on steel products including from India , market conditions may change.
But there is still time for the investigation to show results, said the industry executive who spoke on the condition of anonymity. The probe may go on for nine months and shipments may not suffer during that time, he said.
The EU accounted for around 40 per cent of India’s total steel exports so far in this fiscal year.