News Room - Steel Industry

Posted on 04 Nov 2008

Indian domestic prices to go down further by 10% to 20% by 2008 end

Although domestic steel prices are continuously reducing since July 1st 2008, the comparison of fall when compared with reduction in global levels points to a scenario, where in during November and December Indian domestic prices are likely to crash further to maintain parity with global levels

 

Both Indian domestic and global price levels were at peak during early July, although Indian domestic levels, due to Indian government’s drive to tame inflation, were suppressed by about 10% as compared to global levels

 

Since then the fortunes of both global as well as Indian steel industry has changed to a large extant. Now almost every steel maker is facing daunting task of sales realization to cover their variable costs and failing to book orders.

 

 

It is clearly reflected that long product prices in India have come under much more pressure so far and have reduced by about 32%, whereas flat product prices have gone down by only 15%.

 

But, when we look at the global pricing trends, which are dominated by FOB levels at Black sea and China, it is seen that the price crash has been much more severe.

 

FOB Black Sea
Item	4-Jul	31-Oct	Change	% Per day
Billets	1200-1220	250-285	-943	-8.479
Rebars	1260-1300	390-430	-870	-7.78
Wire rods	1260-1300	390-430	-870	-7.78
HRC UKR	1140-1170	460-500	-675	-6.084
HRC RUS	1170-1220	490-550	-675	-6.065
Plates	1250-1400	780-880	-495	-4.374
CRC UKR	1160-1220	540-570	-635	-5.734
CRC RUS	1250-1300	570-600	-690	-6.141
FOB China
Item	4-Jul	31-Oct	Change	% Per day
Billet	1100-1120	420-450	-675.608	-5.5
Rebar	1090-1130	470-500	-625	-5.663
Wire rod	1130-1150	500-530	-625	-5.648
HRC	1000-1040	450-500	-545	-4.934
Plates	1140-1150	660-700	-465	-4.206
CRC	1130-1170	580-610	-555	-4.983
HDG	1140-1190	600-620	-555	-4.976

Although these levels are still reducing week over week, even if we assume that they have reached the bottom, the price reduction on average has been as under

Long products – About 70%

Flat products – About 55%

 

During last 4 months, Indian rupee has weakened a lot and has affected the import parity pricing.

 

Thus, to arrive at import parity pricing for Indian domestic prices, we need to take into account the suppressed levels of domestic prices in July beginning as well as exchange rate fluctuation.

 

Indian steel majors including Steel Authority of India Limited, JSW and Essar Steel have announced major price reductions for November, which in all likelihood would result in market prices across India in coming weeks.