The upbeat movement in steel prices in the last one month created much debate as the price rise in the key input to varied industries including automobile, real estate, consumer durables, has created ripples of turbulence across the sectors. But it is evident from the global coal scenario that steel prices may continue to dent the profitability of key sectors in India.
Steel sector sets the tone of development and recovery not only in India but also for US and Europe, badly hit by the recessionary downturn. Worst is expected to get over for steel, as led by the stimulus packages announced by china last year, sustaining the demand in the market. Although china is large consumer of steel domestically, while it may turn out to be a net exporter with increased domestic production, as many steel mills in the country is adding capacity.
India stands at a better platform as compares to its foreign counterparts in demand recovery. In India, steel producers are in a better position to pass on the cost of inputs and production to the end users, in form of higher final goods pricing. Furthermore, the steel producers are expected to upgrade the prices band of their products in the FY2010-11.
For the coming month, Karvy comtrade has held a bullish view for steel prices as supported by the global fundamental factors. Some of the leading steel producers in India, SAIL, TATA, Essar, Ispat and JSW have so far already announced hikes in the prices of flat and long products by Rs.2000/MT and Rs.1000/MT, looking forward for rise in prices in the futures.
The active NCDEX steel futures contract traded in broad range of Rs. 25,210-29,450 per tonnes for the month of March. Prices gained around 16 percent in the last month as compared to the loss of 6.85% in the same month last year.
The global production and consumption the World Steel Association has upgraded steel output figures. The February 2010 showed a continued increase in production for almost all the major-steel producing countries. The production for February 2010 was 108 million metric tonnes, 24.2 percent higher than February 2009.
Talking about the major steel producing nation, China, the crude steel production was 50.4 million metric tonnes, up by 22.5 percent from February 2009.
The world crude steel capacity utilisation ratio in February 2010 was 79.8 percent, a 15-month high since September 2008. Compared to February 2009, the utilisation ratio in February 2010 increased by 12.0 percent points.
Looking at the upbeat mood in the steel manufacturers, the market is expecting to trade higher and breaks the previous levels on exchanges. According to estimates provided by Karvy Comtrade commodity analysts, above the 30157 levels confirm the firmness of the bullish trend. This month market will trade in the range of 27990-32064 and recommend buying on dips, it said.