The slump in demand, driven by a slowdown in major consumer sectors, continues to weigh on steel prices in India. Hot rolled and cold rolled coil prices have declined by about Rs 3,000 (approximately US $ 42) per tonne over the past 40 days, mainly due to continued downturns in the automotive, residential and infrastructure sectors. Trade tensions between the US and China have also contributed to the region's falling prices.
During 2018-2019 world prices for hot-rolled and cold-rolled steel decreased by 11.5 and 11.9 percent, respectively, compared to prices in 2017-2018. Steel prices fell below Rs 40,000 (USD 560) per tonne in the domestic market, the lowest level since December 2017. The industry is also facing stockpiling due to slowdown in demand.
Why have steel prices dropped in India?
Steel prices are falling due to demand problems, especially given the downturn in the automotive sector. In the second quarter of the year, as a rule, there is a slowdown in construction work due to monsoons. This could also be the reason for the current weak steel prices.
“The slowdown in the consuming industries has led to a drop in domestic demand and prices,” says Ramesh Iyer, head of steel production at the Indian Commodity Exchange (ICEX).
Manoj Jane, director and head of business unit at IndiaNivesh, attributed the drop in prices to global factors. The decline in global consumption amid trade tensions also contributed to the growth in demand.
In recent months, there has been a drop in car sales. To cut back on rising inventories, manufacturers cut production amid weak retail sales and depressed consumer sentiment. Domestic car sales, including passenger cars, commercial vehicles and two-wheelers, fell 12 percent in June 2019 from the same month last year.
Likewise, demand in the infrastructure sector has also declined thanks to investment in new projects, which fell by 80 percent, according to data released by CMIE.
There are many other factors that contributed to the crisis in the metallurgical sector. The main reasons are the introduction of 25 percent US protective duties, protective duties imposed by Europe and Canada on certain goods, a decrease in steel prices in the world market, steel exports of some countries are redirected to India, imports of special steel products not domestically produced and an increase in imports from countries -FTA partners.
