Business Desk, ETV Bharat: Thanks to a host of factors ranging from raw material shortages to strong demand in key foreign markets like China, steel prices in the country have hit the roof. As per a recent report from the Motilal Oswal Institutional Equities, domestic steel prices have touched an all-time high of Rs 57,250 per tonne recently. As per an estimate, prices of hot roller coils and primary rebar have gone up by Rs 12,000 and Rs 15,500 per tonne respectively during the last October-December period.
Soaring demand from China
One of the reasons for an upturn in the steel sector is the rising demand in China. The country's December 2020 trade data exhibits a normalization of the steel trade as net steel exports turned positive on a year-on-year basis for the first time since the onset of the pandemic.
"China's domestic steel prices remain strong and are at nine-year highs which we believe should provide a cushion to regional and Indian steel prices (at lifetime highs)," Motilal Oswal said in its report on the steel sector.
Apparently, the dream run for metals may well continue in the coming months as targeted stimulus in China will continue to prop up demand.
The Odisha Factor
Besides the strong global demand for Indian steel, supply-side issues in Odisha, which accounts for about 55 per cent of the country’s total iron ore production, have propelled the prices.
“On the raw materials front, domestic iron ore supply could not match demand from steel mills as only 6-7 of the 19 auctioned mines in Odisha could begin mining operations,” Crisil research report said on Monday.
“The 19 mines used to sell 65-70 million tonne of iron ore to merchant markets in eastern India. The tight supply augured well for domestic iron ore prices, which more than doubled from May-June levels to Rs 4,360 per tonne in December,” added the report.
Uptick in profits
With the economy poised for a V-shaped recovery on the back of strong demand in the real estate and automobile sectors, reports suggest that Indian steelmakers may benefit from high prices.
According to the latest report from the Emkay Global Financial Services on the metal and mining sector, the current run of rising metal prices should result in dream profitability for most companies that witnessed one of the worst phases during the lockdown period last year.
“The best is yet to come for the sector in Q4. While the coking coal prices have remained subdued due to restrictions on the imports of coal in China with Australia origin, leaving the coal market significantly oversupplied, we witnessed a continued hike in steel prices, driving domestic EBITDA per tonne to record highs across the board,” said the report.
This should result in accelerated deleveraging by all major steel mills, except for JSW Steel which still has Rs 19700 crore acquisition pending, added the Emkay report.
READ: Rising Chinese demand brings good fortune for Indian steel sector
(With inputs from agencies)
