Chaotic COVID And The Steel Prices

Chaotic COVID And The Steel Prices

Most Steel companies are set to increase their prices from September owing to cost-push and higher international prices.

As per the analyst at EU-Metal, the difference between domestic and international prices is currently 8%. “An increase in prices from September is on the cards. The iron ore prices were at a six-year high. “International steel prices in August, too, have increased”.

As per the previous data, the average FOB China for hot-rolled coil (HRC) in April 2019 was $532 per tonne. At the beginning of August 2020, it was at $495 per tonne, which has now gone up by $20 per tonne to $515. However, the current price is yet to breach last year’s April level. In April 2019 the material was easily available because the production was not at a halt, but in 2020 after lockdown still the mills are not operating at full efficiency because of this there is a shortage of material, the corona impact can still be seen in the industry and the prices.

The increase from September onwards could be in the range of $30-40 per tonne. While the major primary steel producers said an increase of $30-40 per tonne in steel prices was being contemplated.

As per the industry data and experts, it can be analyzed that the demand is improving across the world and average sales in August were almost at par with pre-COVID 19 levels. However, prices were still not back to pre-COVID 19 levels of March.

While demand was picking up in the domestic market, the export markets were slow as they were buoyant, as for export the material is not available easily. Most of the mills are not exporting rather they want the material to get consumed in the domestic market. Moreover, in order to safeguard domestic producers, even Governments have come up with measures like anti-dumping or increased import duties.

After an interview with a few, in the Far East and MENA region, it was pretty much visible that there are traders who absorbed the increased price levels to a certain extent, however as the prices continue to show an uptrend, some of the buyers continue to stock as they anticipate it will take quite some time for the suppliers to cope up with market demand, while there are others who are now waiting for the prices to come down for them to propagate their businesses.

According to the World Steel Association’s July data released recently, the world crude steel production for the 64 countries reporting to it was 152.7 million tonnes (MT), a 2.5 percent decrease compared to the month a year ago.

However, the recovery was mostly led by China, which produced 93.4 MT of crude steel in July 2020, an increase of 9.1 percent compared to July 2019. While Japan produced 6.0 MT of crude steel in July 2020, down 27.9 percent, South Korea’s steel production was down by 8.3 percent at 5.5 mt.

The overall production in the European Union is estimated to be 9.8 MT of crude steel in July 2020, down by 24.4 percent from the month a year ago. The US produced 5.2 MT of crude steel in July 2020, a decrease of 29.4 percent compared to July 2019; in the CIS, production is estimated to be 8.1 MT in July 2020, down 5.8 percent.

In India, capacity utilization levels were increasing month by month. ICRA said earlier this month that the steel industry’s capacity utilization levels had steadily inched higher from the lows of 27 percent in April to 67 percent in July, but were still lower than last year’s average of 77 percent.

Major primary steel producers were, however, operating at 85 percent to 95 percent.

It is quite evident from the above figures, even after all the chaos of COVID-19, as countries across the world were coming out of lockdowns, demand is slowly picking up its pace and its improving. While the demand is improving and the supply is limited, basic economics suggests a price hike, which has already started to reflect in the markets across the globe.

Leave a Reply

Your email address will not be published.