India's iron ore imports tumbled 90 per cent year-on-year during April-October, after a sharp escalation of 172 per cent in the comparable period last year, said CARE Ratings in its report
Responding to cost pressure and greater demand, domestic steel producers have raised prices by Rs 1,000-1,500 a tonne across products for January.
“Iron ore miners have increased prices by Rs 600 per tonne and so this increases the cost of production by Rs 1,000 a tonne. Hence, we have hiked prices from today (Thursday),” V R Sharma, managing director, Jindal Steel & Power (JSPL), told Business Standard. With this, domestic steel players have raised prices for the fourth consecutive month in a market in which consumption is expected to pick up after the government announced a mega push for infrastructure projects.
Stock prices of all steel firms were up on Thursday in anticipation of rise in demand for the commodity, mainly from the infrastructure sector, in coming months (see chart). “Restocking, which was minimal earlier, coupled with demand coming back, is leading to a hike in product prices,” said Jayant Acharya, director (commercial and marketing), JSW Steel.
During October-December, long product producers such as Naveen Jindal-led JSPL and state-owned Steel Authority of India (SAIL) have recorded strong production figures, indicating a demand pick-up in infrastructure. JSPL recorded 30 per cent sales growth in the December quarter at 1.66 million tonnes compared with the same period in the previous financial year. “We are most likely to cross our production guidance of 6.5 million tonnes for FY20 and produce around 7 million tonnes,” said Sharma.
Demand for domestic iron ore has gone up after the increase in global ore prices, said industry officials.
Domestic iron ore prices are estimated at around $65 a tonne as against $85-90 a tonne for imported ore. Odisha-based miners have raised iron ore prices by around 10 per cent even as supply from the state hit an all-time high as steelmakers stocked the mineral in anticipation of a disruption when multiple mine leases expire at the end of this financial year.
Iron ore and coking coal are key raw materials used in making steel.
India’s iron ore imports tumbled 90 per cent year-on-year during April-October, after a sharp escalation of 172 per cent in the comparable period last year, said CARE Ratings in its report.
This is the lowest level of imports recorded in the past seven years. Elevated global iron ore prices during the period prompted domestic steel players to opt for locally produced iron ore instead of importing the mineral at inflated prices, it said.
Industry representatives expect ore prices to rise further by 10-15 per cent in the next three months because the difference in prices of domestic and imported iron ore is high.
“We are sourcing ore from captive mines and from local markets at present and have reduced dependence on imported ore,” said Acharya.
Meanwhile, SAIL achieved the highest ever sales in a month in December at 1.68 million tonnes, up 47 per cent over the corresponding period in 2018. In November, too, the company recorded a 36 per cent jump in sales on a year-on-year basis.
Tata Steel, Sajjan Jindal-led JSW Steel, and state-owned Rashtriya Ispat Nigam Ltd are among other top steel producers in the country. While the tide has changed for Indian steel exports since beginning of the current financial year amid weak domestic demand, companies said they would continue to export but keep domestic sales as first preference.
In the last two weeks, prices of long steel products (ex-Ghaziabad), quoted on Go ICEX, went up 9 per cent to trade at Rs 31,800 per tonne.
This spot price at Gobindgarh Mandi, the largest secondary market for steel products, indicated that secondary market players were seeing prices moving up.
“Exports will account for 15-20 per cent of our revenue but the preference will surely be for the domestic market,” said Acharya.
The export market for Indian steel is also vibrant because global prices of metallic products such as scrap and direct reduced iron (DRI) have gone up. Due to this, countries such as Indonesia, South Korea, and Vietnam are unable to export steel in the same strength since they import these metallic to make steel. This has left room for higher exports from India making steel produced more competitive than before, said industry officials.
“Of our sales, we will have 20 per cent for exports and the balance for the domestic market this financial year,” said Sharma.
Reference: Business Standard Newspaper
Dated: 03/01/2020
