Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Buoyant global steel prices are expected to keep Indian steelmakers’ export volumes high in March and April, according to market research firm ICRA. In February, exports grew by 15pc and 25pc on a yearly and monthly comparison, respectively. 


Major steelmakers are expected to export in large volumes as international prices remain favorable due to strong demand within China and its production curbs to control emissions. Domestic steel prices are 10pc less than international prices. However, in February, India’s domestic steel consumption dropped by 7.6pc from the prior month as elevated steel prices forced some of the end-users in to await and watch mode.  


India’s steel consumption is expected to grow moderately due to the resurgence of COVID-19 cases in March and increasing restrictions in the country. Despite this, high international steel prices could keep domestic steel prices supported, according to ICRA.


Amid the ongoing vaccination drive and extent of the lockdown being imposed limited, no major impact is expected. A sharp recovery in demand in December 2020 and January 2021 limited the contraction in domestic steel consumption to just 9.9pc in eleven months of FY2021 compared, to a 19.6pc drop witnessed during the first eight months of the fiscal year. 


Jayanta Roy, senior vice-president & group head of Corporate Sector Ratings, ICRA, said elevated Chinese HRC prices and high freight rates are likely to keep imported steel prices at least 10pc higher than domestic steel. As a result, even if the domestic steel consumption is moderate in the coming months, domestic steel prices are not expected to fall drastically from the current levels.


Domestic iron ore supplies continue to remain tight with only ten of the nineteen mines that were recently auctioned in Odisha, starting production till February 2021. Though the Mines and Minerals (Development and Regulation) Amendment Bill, 2021, which allows merchant sale of up to 50pc of the annual production by captive iron ore mines owners, is a positive development, ICRA expects the ore supply tightness to prolong for the next 6-9 months.


The operating margins for steel mills rose sharply in Q3 FY2021 due to a steep hike in steel prices and higher sales volumes. ICRA expects the operating profitability of the industry in Q4 to improve further to around 32.4pc due to an Rs8,000/mt increase in average steel prices during the quarter.  


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