Indian Steel Prices and Market Trends for 2022

The Indian steel market is expected to strengthen in the long term due to its robust population growth and urbanization. Domestic steel prices will continue to drive production throughout the next few years as new infrastructure projects are implemented, particularly in the real estate, transportation, and communication sectors. The growth of this sector will lead to a rise in the need for raw materials like iron ore, bauxite, coal, etc. Thus, the prices of these commodities will go up during the 2022-23 fiscal year.

Global Players: China

China’s steel production growth has shown a drop of ~10.5% over the period of January to March 2021-2022. The slowdown is consistent with the trend we have been seeing over the last few quarters where the growth rate of Chinese steel output has been falling from close to 10% in mid-2017 through late 2018 into early 2019 before stabilizing at around 5%.

According to data released by the China Iron and Steel Association, the average steel price of domestic products in April was 6.8% higher than that of March this year. The growth rate was 7%. This situation is due to the reduction of steel production capacity, as well as low demand for property development, which has led to a decline in market prices.

Also, China’s total export volume decreased by 2.6% year-on-year during April 2019. Imports fell by 21.9% (excluding re-exports), resulting in a record trade surplus of $10 billion USD or 0.7% GDP growth rate).

Global Steel Exports

Global steel production is expected to grow by 2% in 2019, with a forecasted increase of 0.9% in 2020 and 1.7% in 2021. According to the International Iron & Steel Institute (IISI), global demand for steel is projected to increase from 1,567 million tons (mt) in 2018 to 1,620 mt in 2023. Despite the sluggish economic growth in India, the demand for steel has been growing because of its infrastructure development program. India’s Ministry of Steel expects that domestic production will reach 90 megaTonnes (mt) by 2022-23 and 95 mt by 2025-26 while imports are expected to drop 40%.

The pandemic’s impact on steel prices can be understood by the following statistics. India’s total exports reached 715 kiloTonnes (Kt) during FY2018-19 which was up by 5% over the previous fiscal year but was still lower than 907Kt shipped out during FY2017-18. During April 2019 alone there were 15 vessels loaded with all kinds of iron ore cargoes including fines which left Indian ports bound for various destinations including Japan, Vietnam, South Africa, Mozambique, etc.

The Indian Scenario

The Indian government is making strong efforts to manage steel prices by curbing the dumping of steel, especially from China. As a result of this, the Indian government has already imposed anti-dumping duties on steel imports from China, Japan, and South Korea. The government has also imposed anti-dumping duties on steel products from the US. India might also consider setting more anti-dumping duties on imported products from these countries in 2022.

Coking coal prices are increasing rapidly across India. In the last three years, coking coal prices have increased by more than 50%. The Indian government has raised its import duty on coking coal to 40% in order to protect domestic players and ensure that they have enough cash flow to invest in new projects.

Domestic Steel Market

Domestically produced steel prices increased by about 7.4% in April. The domestic steel market will continue to grow, and it is expected that the price of domestic steel will increase further. The domestic steel industry continues to be hampered by overcapacity, high debt, and low prices. The Indian government needs to restructure the Indian steel industry in order to improve its performance. The demand for steel has been increasing at a steady pace over the last few years, as urbanization and industrialization have continued in India. There has also been an increase in exports, due to which companies have increased production levels to make up for the time lost post-demonetization.

The price of iron ore rose sharply during Q4’19; however, it fell back slightly after the first month of FY2020 (April 2020). In May 2020 alone, however, it rose again by around 26% year-on-year (YoY). This allowed many Indian Steel manufacturers like SAIL and JSW Steel Ltd., etc., who produce products such as structural beams and pipes used by construction companies across India also develop export channels.

Leave a Reply

Your email address will not be published. Required fields are marked *