Steel prices rise again, but will they last?

The increase in prices is likely to be supported by higher coking coal prices and stable export prices. Also, companies are looking for European export opportunities in the wake of supply disruptions in Turkey. Domestic HRC prices were up in the traders’ market 400 per ton week-to-week 59,710 per tonne, according to ICICI Securities channel cheque.

According to analysts, export prices to India remained at the level of $705-708 per tonne, helped by price rise from Far East, Chinese and Russian suppliers. According to Nomura Research data, China, South Korea and Japan have raised their exported HRC prices by $15-35 a tonne to $705-730 a tonne.

Traders are anticipating prices Analysts at ICICI Securities said favorable import parity and better export realizations capped at Rs 1,000-1,500 a tonne in March. However, the spot spread remained at an 11-month low. The spread is the difference between the prices of raw materials and the price of the finished product.

Analysts at Nomura Research said after the HRC price hike this week, average HRC spreads increased 3% week-on-week, but average spreads month-to-date for February 2023 were down 4.8% month-on-month. which is at its lowest level. levels after March 2022. This is largely due to increase in coking coal prices, up 16.9% month-on-month and 3.8% week-on-week.

Thus, further price increases would be necessary to improve the profitability of the companies. However, an industry source highlighted that international demand remains weak at present, and hence, any price increase will have to be sustained in the current environment. Coal prices are volatile and have come down in last 3-4 days. Shipping costs are likely to decline, but since demand is weak, steel prices may move lower once cost pressures ease.

China’s steel demand also remains weak. A Nomura Research report for the week ending February 24 shows China’s steel demand for January came in at 74.8 million tonnes, up 2.2% from December 2022 levels but down 4.5% from a year earlier Is.

Thus, while the metals sector’s prospects remained high on optimism over China’s reopening, not much of a recovery is in sight. China remains the largest consumer of commodities, and substantial reforms in China could help improve global prices and demand.

Antu Thomas, research analyst at Geojit Financial Services, said, “The reopening of the Chinese market will be positive for metals companies in the long term. But the short- to medium-term trajectory will be determined by concerns about global developments, which are unfavourable.”

Local businesses with international exposure saw margin erosion in the first nine months of FY2023. He added that global headwinds such as high inflation, rising interest rates and recessionary conditions pose a threat to the performance of manufacturers in the near term.