International prices of base metals have gradually slashed from 9 to 17% since April from the soared levels, giving some relief to the related industries, which noticed a sharp rise in input prices. Between April 11 and May 10, a sharp fall of 15%, 9%, and 17% was noticed in the LME, copper, and zinc prices, respectively. China's domestic price of HRC (hot-rolled coil) steel fell by 15%.
As per Trading economics, steel prices have dropped below CNY 4,500 per tonne, a level not seen since last December. They are now roughly 15% below their early May peak due to persistently weak demand and rising inventories.
Source Image: Trading economics
Some glimpses from the past
In 2021, the steel price in the Indian city of Chennai reached 59.78 Indian rupees per kilogram. On the other hand, steel in Pune was less expensive at 58.08 rupees per kilogram. Therefore, it was projected that steel prices would decrease in all the presented cities. However, driving demand for Indian iron ore in China is said to have increased the steel price in India significantly at the end of 2020.
In India, the steel price varies depending on the cost of import and the prices of other metals and raw materials. Because of these underlying causes, steel prices crashed to ₹65000 per ton from a whopping ₹71000 per ton. Prices were seen at ₹76000 per ton in April 2022, but because of the excess supply during the weak demand, the prices fell with the incoming southwest monsoon slowing the work.
According to analysts, the market expects steel prices to go to ₹60,000 per ton in July 2022 and drop to ₹55000 per ton in August 2022. However, it may not fall further and then gain stability.
Currently, the steel market is in a chaotic condition, and demand is stagnant because of the undercutting done by dealers in expectation of the price reduction by steel manufacturers. Steel price fell by ₹5000 per ton because of the imposition of export duty, and the hot-rolled coil presently hovers at ₹65000 per ton.
Major industries affected by the fall in steel prices
A lot of manufacturing units rely on steel for their products and services. From automobile manufacturers to consumer electronics, 'steel' enjoys a huge presence. It is also used for equipment, machinery, steel wire ropes, and hardware production.
The major industries impacted by the fall in steel prices are:
- Steel wire rope
Here are the reasons why steel prices crashed
Government steps: A rise in export duty
To control roaring steel prices, in May 2022, the government hiked the export duty on finished steel to 15%. However, the government did not include steel intermediaries in the export duties list.
Post this, the semis exports declined by 26% last year to 4.9 MT. However, they may notice a rise in the current financial year. The demand for domestic steel fell by 7.2% every month and is expected to fall more. The fall in the raw material cost will have a positive impact on the manufacturing sector and also help to keep the prices in control. In addition, the fall in import duties of iron ore and steel will enhance domestic availability and further help reduce steel product costs.
China's steel demand
As per Fitch experts (an American credit rating agency), the steel demand growth from the construction industries of China has largely peaked in the first six months of 2021. The firm never estimated any demand effect from government incentives after the pandemic struck in April 2020 to support the post-Covid recovery. With current projects and new infrastructural work being taken up, the steel demand will rise during 2022-2025; the company doesn't predict the gush in demand to return from 2022 onwards.
Our part: Being a leading wire rope solution provider
When the steel prices rose, companies like Usha Martin came out with good performance with an increase in revenue and EBITDA. The company offered top-quality products to its clients, maintained its standards, and continued to meet specific customer needs for critical applications under challenging conditions.
In recent times, when steel prices in India have come down sharply, Usha Martin has adapted well to this change to optimize its operational benefits. It facilitates the sourcing of steel rods at a lower price and enhances production. The company is one of the largest steel wire rope manufacturers, offering customized services for diversified fields such as ports, mining, bridge installation, renewable energy, oil & offshore, elevators, ropeways, and more. It manufactures high-quality crane wire ropes, elevator ropes, mining ropes, conveyor cords, fishing ropes, wire rope slings, and structural ropes.
The steel price fall helped us bring down the cost of production and offer better value propositions to customers. From quality checks to customization and technical services, the company offers all to live up to the expectations of its clients. It endeavours to use the best of its technology and raw material procurement processes to deliver to its customers efficiently.
The imposition of export duty by the government on finished steel is expected to lower the domestic steel industry prices further.
Usha Martin acknowledges these government initiatives and aims to enhance its working accordingly. For more details, speak to our experts now!