Steel dealers build inventory as tight supply fuels expectations of further price rise: Report

Domestic steel prices are expected to remain firm in the near term as tight supply, import duties and elevated raw material costs encourage dealers to build inventory in anticipation of further price increases, brokerage firm Centrum Broking said in a report based on dealer interactions.

Domestic steel prices are expected to remain firm in the near term as tight supply, import duties and elevated raw material costs encourage dealers to build inventory in anticipation of further price increases, brokerage firm Centrum Broking said in a report based on dealer interactions. Centrum said any correction in steel prices is likely to be limited and could be deferred until late November or early December. The report noted that supply remains tight, with allocations from primary producers falling short of demand and dealers often receiving only 50-75 per cent of the volumes they request.

“Steel dealers have shifted from need-based purchasing to actively building inventory in anticipation of further price increases,” the report said, adding that this has supported strong channel demand, although part of the recent strength reflects inventory accumulation. The report further added that domestic flat steel prices have remained on a sustained uptrend, supported by supply constraints, maintenance shutdowns, import duties and elevated raw material costs, particularly coking coal.

The channel behaviour has also changed in recent months. According to Centrum, dealers were largely following a need-based procurement strategy earlier, but rising prices and tighter availability have resulted in inventory build-up across the distribution channel. “While current channel activity is strong, the dealer's comments suggest that part of the recent demand strength is driven by advance buying and inventory accumulation, rather than solely by underlying end-use consumption,” the report said.

At the same time, the report indicated that demand remains healthy, with dealers buying steel ahead of requirements as they expect prices to rise further. The report said demand in Gujarat could soften during October-November due to festivals and holidays. However, demand typically strengthens from January-February as the festive period ends, while potential disruptions to imported or Chinese material around the Chinese New Year could further tighten availability and support domestic mills.

In the steel pipe segment, the report said multiple price increases had taken cumulative hikes to around Rs 6-7 per kg, with a further Rs 1.5 per kg increase announced from October 1. (ANI)