Steelmakers see prices falling

Indian manufacturers could benefit from opportunities in export markets amid ongoing European energy crisis

Working conditions for steel producers deteriorated due to further falling steel prices and higher coking coal prices. The demand situation is still subdued. Domestic hot rolled coil prices fell Rs 700 per tonne from the previous week to Rs 55,200 per tonne, Nomura Financial Advisory and Securities (India) reported on September 12, citing SteelMint. They also added that the average price in September is currently 3% below the average price in August.

In addition, there is increased pressure on margins due to a sharp increase in coking coal costs after a short period of easing. However, on the other hand, iron ore prices continue to be stable.
However, a significant increase in demand for the metal is a key factor. The September quarter (Q2FY23) is expected to bear the brunt of seasonality and demand is likely to improve after that.
“Our channel checks show that dealers are cautiously optimistic about a recovery in demand in the second half of fiscal year 2023,” Edelweiss Securities analysts said in a Sept. 9 report.

Meanwhile, Indian manufacturers may take advantage of opportunities in export markets amid the ongoing energy crisis in Europe, analysts at Edelweiss Securities said.

But due to the collection of export duties on finished products, there is an increased potential for the export of semi-finished products. Export duty is a key drag on steel stocks, and positive developments on this front should improve investor sentiment. Shares of Tata Steel, JSW Steel and Jindal Steel & Power fell 13-28% from their 52-week highs.

SteelMint noted that the Commerce Department has seen a drop in steel prices since the 15% export tax was introduced in May-22, but is waiting to find out if the price decline was the result of weak seasonal demand during the rainy season or due to exports. tariff cuts, according to the Nomura report. “Consideration on a rollback or reduction of the export duty will be made after finding out the reasons for the fall. The duty may be retained unless it is determined that the price reduction was caused by the imposition of the duty and not by a seasonal monsoon factor.