Steel secretary Atul Chaturvedi recently said that a deterrent on iron ore exports would do fine for the domestic steel industry Domestic demand for steel witnessed an unexpected meltdown from the second half of the first quarter (April-June) of 2010-11. A marked surge in cheaper steel imports, especially from China and excess production capacity added to the sector’s woes. Steel imports increased by a record 74.9% in the April-June quarter as against the corresponding period in the previous year.
The result: Domestic steel prices started softening and corrected sharply in June. The pricing woes put pressure on the country’s leading steel stocks during the same period. On the Bombay Stock Exchange (BSE), stocks of steel majors such as Jindal Steel, Steel Authority of India Ltd (SAIL), Tata Steel Ltd and JSW Steel Ltd mellowed within the range 0.7%-4.2% over the last 1 month.
Furthermore, steel exports witnessed around 15.1% decline during the reporting quarter. Analysts expect steel sales to remain flat on a year-on-year basis, particularly for the aforementioned bigger players. Expressing concern over the sector’s performance, Girish Agarwal, an analyst with a reputed brokerage firm in Mumbai says, “With the onset of monsoon, the demand for steel from the construction sector, a major consumer of the alloy, is likely to dip further.”
.jpg) Globally, the prices of steel products witnessed 15-25% decline since May on the back of slump in inventory restocking and rising supply. On the brighter side, steel prices may rise by half globally in 2010-11, following input cost hike and delayed capacity additions, opines the research head at Crisil, a leading market research firm in India.
Deter iron ore exports
Iron ore, a non-renewable resource, is a key raw material for steel manufacturing. In 2009-10, India produced around 226 million tonnes (mt) of iron ore as opposed to 215 mt in 2008-09. However, the country exports almost half of its iron ore output to China, which has become a concern for the country’s steel industry.
Steel secretary Atul Chaturvedi recently said that a deterrent on iron ore exports would do fine for the domestic steel industry. He proposed an export tax on iron ore but added that it may vary depending on prices. However, states will be consulted before taking a final call, assured Mr Chaturvedi.
Jeeta Bandopadhyay |
