Domestic steel producers may come under pricing pressure

Domestic steel producers may come under pricing pressure

Mumbai | Kolkata: The novel coronavirus outbreak is likely to put pressure on domestic steel prices in the near term and increase downside risks for the sector due to a drastic supply-demand imbalance causing an inventory pileup, two reports released on Thursday said.

The Covid-19 outbreak is likely to adversely impact Indian steel prices, which have been witnessing an upward trend since November, rating agency ICRA said in a report, while India Ratings & Research (Ind-Ra) warned that the demand-supply imbalance created globally will get worse with the virus spreading across the world.

“Domestic steel prices are currently trading at a discount of 7 percent to landed cost from China,” said Jayanta Roy, senior vice-president at ICRA. “While this provides headroom to domestic steelmakers to increase steel prices, the rising number of confirmed cases (of Covid-19) in India could add pressure to steel prices in coming months.”

Consequently, ICRA has revised its estimate of domestic steel consumption growth to 4-5 percent in 2020-21 against its November 2019 forecast of 6.5 percent. The Ind-Ra report said Indian steel producers would face pricing pressures of about $30 per tonne, which could result in margin pressures of $25 per tonne.

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