The high record-setting finished steel prices that have been evident in H1 2021 in India may not ease in H2, Brickwork Ratings has indicated.
Demand is anticipated to reach its height amid the second pandemic wave in India resulting in a weak demand outlook in some sectors. However, the auto and construction sectors are showing resilience with potential demand strength.
High, competing imported steel prices and long lead times due to production bottlenecks are also projected to support finished steel prices into early next year. Domestic finished steel prices are still more attractive trending at about 15-20pc lower than landed imported steel.
The increase in iron ore prices, higher domestic freight costs on higher fuel prices, higher ocean freight costs, and domestic production restrictions on oxygen allocation changes recently, are also firming up domestic finished steel prices, Brickwork noted.
The main driving force of strong finished steel prices is a healthy Chinese economy that is consuming steel goods and policies that are also limiting exports by Chinese companies. Additionally, China is confronting higher input prices from iron ore to ferrous scrap as well as environmental policies that will increase costs for companies, according to the rating agency.
The inflated prices are resulting in the escalation of input materials in construction, infrastructure, and consumer goods that require steel.