Steel prices to stay stable in FY'24: Crisil
Domestic steel prices are expected to remain stable in the coming months of the current fiscal, backed by strong demand, rising coking coal prices and production-related dynamics in China, amid a slowdown in the global economy, according to a Crisil report released on Tuesday.In its market intelligence and analytics report, Crisil expects flat steel to hover around Rs 59,000 per tonne and Rs 56,000 per tonne for long steel.
Domestic steel prices are expected to remain stable in the coming months of the current fiscal, backed by strong demand, rising coking coal prices and production-related dynamics in China, amid a slowdown in the global economy, according to a Crisil report released on Tuesday.
In its market intelligence and analytics report, Crisil expects flat steel to hover around Rs 59,000 per tonne and Rs 56,000 per tonne for long steel. It said that domestic steel demand is poised to grow in double digits for the third consecutive year, supported by pre-election spending in the current fiscal year.
''Flat steel prices should remain elevated at around Rs 59,000 per tonne in fiscal year 2024, dipping only marginally by 2-4 per cent on-year amid better demand prospects and rising coking coal prices. Prices are expected to average at around Rs 60,000 per tonne in the second half of this fiscal as against Rs 58,300-58,500 per tonne in the first half,'' said Sachidanand Choubey, Manager (Research) at CRISIL Market Intelligence and Analytics.
He said long steel prices are expected to stay stable at around Rs 56,000 per tonne.
Between April and July this year, flat steel prices had corrected by Rs 4,500-5,000 per tonne and long steel prices by Rs 6,500-7,000 per tonne. In the first five months of the year, demand has grown by 13 per cent. While frontloading of central government capital expenditure (capex) could lead to a slowdown in demand in the second half of the year, Crisil analysts expect overall demand to grow by 10-12 per cent.
This would follow growth of 11.4 per cent and 13.4 per cent in the previous 2022 and 2023 fiscal years, respectively. ''The first-quarter growth of 60-65 per cent on-year this fiscal is way above past trends. With annual growth in infrastructure capex (central + states) expected at around 25 per cent this fiscal, we believe domestic steel demand has great support,'' said Koustav Mazumdar, Associated Director Research at Crisil Market Intelligence and Analytics. The infrastructure segment accounts for around 30 per cent of total steel consumption in India. In the past five years, infrastructure capex (central and state combined) has logged an 18 per cent compound annual growth rate, he said. The central government has already utilised around 32 per cent of its total budgeted capex on big-ticket infrastructure projects in April-July 2023, compared to an average of 26 per cent in the past four fiscal years, the report noted. This is an unprecedented increase of 30 per cent in infrastructure capex, which is likely to be achieved given the government's track record of achieving 98 per cent of budgeted capex in the past four fiscal years. The rising prices of coking coal, a key raw material for steelmaking, are also likely to support domestic steel prices. Coking coal prices have increased by around 50 per cent in the past year, and are expected to remain elevated in the near future, Crisil research said. Finally, production-related dynamics in China, the world's largest steel producer, are also likely to support domestic steel prices. China has been taking steps to reduce its steel production, which could lead to a shortage of steel in the global market, it noted. Private capex revival and steady auto demand will further drive growth. All this, amid fluctuating global raw material prices, will keep flat steel prices around 50 per cent higher than pre-pandemic levels on average this fiscal year, Mazumdar said. On the raw material side, Crisil said that coking coal prices started climbing again in August. Australian coking coal prices rose to around USD 280 per tonne in the second week of September from around USD 230 per tonne in July. The closure of several mines in China post an accident in August worsened an already tight supply situation, the report noted.
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