Indian steel prices won’t fall as much as global rates: JSW’s Seshagiri Rao | Business Standard News

Clipped from: https://www.business-standard.com/article/economy-policy/indian-steel-prices-will-not-see-same-fall-as-global-rates-jsw-steel-md-121120900357_1.html

JSW Steel MD and group CFO Seshagiri Rao said Indian steel prices were at a discount to international prices during the rally and therefore the correction will not be as steep

Seshagiri Rao, Joint MD, JSW Steel & Group CFOSeshagiri Rao, Joint MD, JSW Steel & Group CFO

Steel companies reduced prices in December across flat and long products on the back of a global correction. Seshagiri RaoJSW Steel joint managing director and group chief financial officer, tells Ishita Ayan Dutt that Indian steel prices were at a discount to international prices during the rally and the correction will not be as steep.

Edited excerpts from an interview.

Have prices peaked?

Prices are correcting globally because raw material prices, particularly iron ore, corrected from $230 a tonne to less than $100 a tonne. Even prices of coking coal imported by China –from the US, Canada and Mongolia – went up close to $600-plus on a C&F basis, but corrected steeply to below-$400 a tonne. These two reasons influenced steel prices in China domestically.

Over and above, the property market going down in China also contributed to the steep fall in demand in China. As a result, prices within China fell from around $1000-plus a tonne to around $800 a tonne FOB. To that extent, Asian prices in the similar range, also got corrected.

Prices in the US and Europe also corrected. But the difference between the US, Europe and China definitely remains. That means, European prices compared to Asian prices are at a higher level and similarly, the US is at a higher level than Europe.

But other than China, the underlying demand is reasonably okay in the rest of the world. India has to be seen in that context.

When prices went up close to $1100 a tonne in China, Indian steel prices were in the range of $850 a tonne. It was always at a discount of 20 per cent. So, when global prices corrected, even though there is correction in India, it is not as steep as in the past.

Are current domestic prices higher than China?

At $800-$810 a tonne, landed cost of imports from China comes to $914 a tonne. So, Indian prices are still at a discount. But compared to domestic prices in China, Indian prices are higher.

What is the price reduction in long products this month?

The reduction in long products is also in the range of Rs 2,000-2,500 a tonne. There is always a difference between flat and long products and then there is a difference in price between primary and secondary producers of long products.

Has domestic demand not picked up as had been anticipated and what is holding it back?

The unseasonal rain which happened in October and November and is continuing in some parts of India even in December acted as a dampener in the pick-up in demand. From August onwards, we were seeing a slight lower demand in India relative to the previous year.

Consumption was at a level of 8.5 million tonne in November, which is 8 per cent lower than the previous year. But December onwards, we feel some traction should happen, driven by government expenditure and the pick-up generally in the retail side.

But there is clarity as to what could be the prices in the domestic market. People were expecting Indian prices to correct after the global correction. But when global prices went up, domestic prices did not go up to that extent. So, the same fall will not happen though there has been some correction.

I would like to highlight that the underlying demand is there. Everybody expected a fall in prices and that’s why inventories were used in November. So, this month, I am optimistic that things will improve.

Will the impact of lower iron ore and coking coal reflect in the current quarter?

We always maintain a 45-60 days’ inventory for coking coal. So, the low cost which we are buying right now, will get into consumption in the second half of February. The gap for iron ore gap is less and generally it gets reflected.

Would you be bidding for Neelachal Ispat Nigam Ltd?

A lot of work has been done. So it may come up for bidding anytime now. We are examining and will take a call this month.

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