Steel prices likely to dip further
Steel prices in the domestic spot market will continue to remain under pressure
this year as growth in key end - user industries has taken a backseat, as per a
report prepared by consulting firm Ernst & Young(E&Y).
"Steel prices are likely to plunge further as consumption levels, particularly in the
automobile sector, are moving southwards," said E&Y partner (transaction advisory
services) Navin Vohra. He added that fall in prices of raw material such as iron ore
and coking coal will also compel companies to bring down the steel prices.
Steel prices have already fallen more than 35% from a peak of Rs 50,000/tonne in
April last year to Rs 30,000 - 32,000/tonne level last month.
With a view to correct demand - supply mismatch steel companies such as Essar,
Ispat and JSW slashed production in October last year. Now that demand of steel
from construction sector has picked up marginally, companies have increased their
production levels but are yet to resume full - scale production.
"Though demand situation will remain bleak in the short term, capacity in the
commodity industry has to move to low - cost centres in the long term and India is
well - placed with abundant high - quality iron ore, qualified manpower and competitive
capital costs," Mr Vohra said.
The stimulus packages announced by the government with a special focus on
infrastructure, will help Indian steel firms to more than double their production to
125 million tonne by 2015, the report said. India's annual steel production stands at
about 56 million currently.
The global steel industry grew at a compounded annual growth rate of 7% between
2003 - 08 to touch 1,329 million tonne last year. The top five steel producers - China,
Japan, US, Russia and India - together accounted for 63% of the global steel
production in 2008, the E&Y report said.
Source : The Economic Times
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