Steel prices may fall further: Experts

After price reduction by some of the domestic steel firms on Tuesday, industry experts are of the opinion that further reduction may be on cards in the first quarter of the current financial year if the rupee strengthens further, without any pick up in demand

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"We may see further reduction in steel prices if there is no uptick in demand. It is also an indication that companies are not able to hold on to the price hike done in last few months due to weak demand," said analyst (metals & mining) of Angel Broking, Bhavesh Chavan.

Steel firms like JSW Steel and Essar Steel reduced prices by up to Rs 7500 in select products yesterday. Interestingly, domestic companies had increased prices in the first two months of the calendar year to protect their margin on the back of rise in raw material cost.

Referring to the issue, an analyst with rating agency, ICRA said going ahead, rupee movement will be crucial for the pricing of steel products with further strengthening of the currency may pull down prices.

"Steel prices in the domestic market will also depend on rupee movement going ahead. If we see further strengthening of rupee, then some price reduction may be expected by steel firms in the current quarter," Senior Vice-President and Head of Corporate Ratings of ICRA, Jayanta Roy said.

Rupee movement has intrinsic relationship with steel price as it is in line with landing cost of steel imports to the country.

Roy also said that domestic steel firms may face pricing pressure due to higher imports from countries including China, which has a surplus capacity and therefore may push for exports of steel products due to weak demand environment in the second largest economy. 

On the steel demand, Roy said it is likely to remain soft in the near-term, impacting the pricing power of steel mills. However, state-owned Rashtriya Ispat Nigam Ltd (RINL) has decided to increase prices due to its low inventory level.

"Though many companies have reduced prices with some rolling over it, we have decided to increase some product prices by around Rs 750 per tonne due to low inventory level. Also, we want to contain the rising cost due to higher freight charges," RINL commercial director T K Chand said.