Domestic steel prices are expected to more or less hold up this fiscal at Rs 59,000 per tonne (flat steel) and Rs 56,000 per tonne (long steel) despite a slowing global economy. Smoldering domestic demand, rising coking coal prices and production-related dynamics in China, the world’s largest steel maker, are likely to prevent the slide.
Domestic demand is poised to grow in double digits for the third consecutive year, buoyed by pre-election spending this fiscal. In the first five months, it had already risen 13%. Frontloading of central government capital expenditure (capex) could imply demand tapers in the second half. Still, over the entire fiscal, Crisil expects demand to grow 10-12% on-year. This would come on top of 11.4% and 13.4% growth, respectively, in fiscals 2022 and 2023.
Koustav Mazumdar, associate director of research of Crisil Market Intelligence and Analytics noted that the infrastructure segment accounts for ~30% of total steel consumption in India. In the past five fiscals, infrastructure capex (central and state combined) logged an 18% compound annual growth rate.
“First-quarter growth of 60-65% on-year this fiscal is way above past trends. With annual growth in infra capex (central + states) expected at ~25% this fiscal, we believe domestic steel demand has great support. Private capex revival and steady auto demand will further drive growth. All this, amid fluctuating global raw material prices, will keep flat steel prices ~50% higher than pre-pandemic levels on average this fiscal, too,” he added.
Sachidanand Choubey, manager for research, Crisil Market Intelligence and Analytics added that flat steel prices should remain elevated at ~Rs 59,000 per tonne in fiscal 2024, dipping only marginally by 2-4% on-year amid better demand prospects and rising coking coal prices.
“Prices are expected to average at ~60,000 per tonne in the second half of this fiscal as against Rs 58,300-58,500 per tonne in the first half. Long steel prices, however, might see a sharper dip of 5-6% to Rs 56,000 per tonne despite robust demand, on the back of cooling input costs, especially of thermal coal,” Choubey said.
