Steel: Situation might get worse - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Steel: Situation might get worse

Jul 6, 2001

The Indian steel industry is feeling the heat of a global slowdown. The consumption of steel in the first quarter of FY01 remained flat at 6 m tonnes. The sliding demand was mainly due to decline in production of white goods (refrigerators and air-conditioners), electric generators, commercial vehicles and cars. Adding to the gloomy picture is stiff trade actions by the US, Canada and European Union (EU) against the import of hot rolled coils (HRC) from India. The recent US steel trade investigation under section 201 covering all steel imports could result in a complete blockage of the Indian steel export for the US markets.

As per International Iron and Steel Institute (IISI) report global steel production declined by a YoY 2.5% in May ’01. During the period January – May ’01, steel production was down by 0.2%. Recessionary trend in the automobile, electrical equipment and construction sector resulted in increasing surplus capacity. This has increased the pressure on the international steel prices. The prices of HRC have fallen by over 24% from around US$ 290 per tonne in January ‘00 to US$ 220 per tonne in June ‘01. In the domestic markets too, flat steel prices have recently dropped by Rs 2,000 per tonne.

US spoil the show
(Production in '000 tonnes) May -00 May -01 Change
European Union 14,593 13,814 -5.3%
C.I.S. * 8,254 8,680 5.2%
North America 12,114 10,055 -17.0%
South America 3,430 3,423 -0.2%
Middle East 789 830 5.2%
Asia 27,263 28,221 3.5%
Total 63 countries 72,194 70,412 -2.5%
* CIS: Common wealth of Independent States
Source: IISI

Increasing capacity in the domestic markets is another factor pressurizing the steel prices. Jindal Vijaynagar Steel’s plans to hike its HRC capacity is likely to further add to the total domestic capacity, which stands at 10.8 m tonnes currently. The domestic consumption of steel is around 7.5 m tonnes and addition in capacity could further pressurize the flat steel prices.

The domestic market for long products however, seems to be providing some relief in an otherwise dark scenario. The demand for products such as rebars, rounds and structurals has registered a growth of around 3% in FY01. The prices too have increased by around Rs 800 to Rs 900 per tonne for various products in this category. The decline in the import of scrap steel has been largely responsible for better performance of this segment. Also, the prices of international scrap in general have gone up, which has resulted in a decline in imports.

Accumulation of inventories and falling steel prices are casting a shadow on the steel sector prospects. This could force global consolidation in the steel industry to provide sustainability to steel prices.

Equitymaster requests your view! Post a comment on "Steel: Situation might get worse ". Click here!


More Views on News

JINDAL STAINLESS (HISAR) Share Price Down by 5%; BSE METAL Index Down 2.0% (Market Updates)

Jun 17, 2021 | Updated on Jun 17, 2021

JINDAL STAINLESS (HISAR) share price is trading down by 5% and its current market price is Rs 194. The BSE METAL is down by 2.0%. The top gainers in the BSE METAL Index [TOPCOMPANY]. The top losers is JINDAL STAINLESS (HISAR) (down 5.2%).

APL APOLLO TUBES Share Price Up by 5%; BSE METAL Index Down 1.4% (Market Updates)

Jun 17, 2021 | Updated on Jun 17, 2021

APL APOLLO TUBES share price is trading up by 5% and its current market price is Rs 1,560. The BSE METAL is down by 1.4%. The top gainers in the BSE METAL Index is APL APOLLO TUBES (up 5.1%). The top losers are JSW STEEL (down 0.3%) and NMDC (down 0.3%).

SAIL's Stellar Quarter Four Performance Puts Stock in Focus (Views On News)

Jun 11, 2021

Shares of Steel Authority of India (SAIL) surged over 5% on the BSE today after the company reported robust March quarter numbers.

Shyam Metalics IPO: Key Points to Consider (Views On News)

Jun 12, 2021

Shyam Metalics is commanding a strong grey market premium ahead of its IPO next week.

Godawari Power and Ispat Shares Surge 9% on Massive Jump in Profit (Views On News)

May 26, 2021

Key takeaways from Godawari Power and Ispat Q4FY21 results.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jun 17, 2021 (Close)