The positive signals from China are expected to maintain a balance between demand and supply and will also support prices. China accounts for 56.5% of global crude steel production.
All eyes are on the Chinese market, which opened last week after the New Year holidays. It was widely expected that prices would improve after the weakness seen in January.
ICRA Senior Vice President Jayant Roy said that steel prices have been trending in historical trends after the New Year celebrations, except last year when Kovid-related sanctions affected China’s steel demand in February.
HRC (hot rolled coil) prices fell to $ 625 a tonne in January after reaching $ 770 per tonne in December. However, the price improved to $ 645 per tonne in February.
In India too, growth had come to a halt after January. Secondary producers, with a two-thirds share of production in long products, slashed prices from mid-January. Whereas primary producers reduced prices in February. There was a softening in the business segment in flat products. China’s market opened strongly on 18 February. Figures from Steelmint show that Dallin’s most traded May 2021 iron ore futures agreement climbed 60 renminbi to close at 1,131 renminbi ($ 174.35) per tonne. On the Shanghai Future Exchange, rebar futures gained 125 renminbi and hot rolled koyal gained 100 renminbi.
“The indications from China on the futures front for HRC and iron ore seem positive so far,” AM / NS India Chief Marketing Officer Ranjan Dhar said.
Jayant Acharya, director (commercial and marketing), JSW Steel, clarified that if overall raw material prices continue to rise, it will reduce margins in China and provide a basis for steel prices. He said, “Therefore, there should be stability in prices.” A secondary producer in the long product segment also said sentiment has improved in the last 10 days and a strong opening in China is a positive aspect.
There are many more positive indicators from China which may prove to be auspicious for India.
Acharya said, ‘China is getting three messages. There is more emphasis on moving towards clean steel and reducing pollution, which will reduce ineffective production. Exports are being reduced (there is a possibility that export rebates may be reduced from 13 per cent to 9 per cent) and in 2021 there is expected to be a slight increase in demand in China. He said, “Export prices will increase to the extent of reduction in concession, which will help bridge the gap between Chinese steel prices and steel prices around the world.” Also, low / balanced exports would be good for the steel industry globally. Dhar said putting more emphasis on positive perception was another possible thrust from China for infrastructure that would restore demand for construction materials there. In addition, with the initiative to control pollution, China may want to import billet from countries like India. In the initial months of lockdown in India, all major steel producers exported billets and China had the largest share in it.
23 lakh tonnes of billet was exported from India in the first quarter, which came down to 1.1 million tonnes in the first quarter due to increasing domestic demand. Steel manufacturers expect demand in the domestic market to remain strong even as there was little pressure on price.