India's steel ministry has indicated that domestic companies are likely to lower rates by about Rs 3,000 a tonne in June owing to the fall in raw material prices.
Steel ministry sources said coking coal prices in the immediate delivery market had declined to almost a third, at Rs 200 a tonne. Iron ore prices, which have been on a
downward spiral, are also expected to have a positive impact on steel-making costs. China iron ore prices have fallen from a high of $197 a tonne in March 2008 to $78 a tonne now.
JP Morgan Asia Pacific Equity Research analysts said steel prices may remain under pressure in case production discipline in two key geographies of Russia and China does not hold. "At current Chinese HRC prices, the marginal mill's cost of production based on spot input prices of coking coal and iron ore is below the spot HRC prices, thus highlighting the increased risk of Chinese steel production," the analysts said.
On India, the JP Morgan analysts stated that despite the fall in input prices, the outlook for the steel sector is weak as demand has not picked up enough. "Long term products demand has recovered somewhat since November 08, while flat products remain weak," the analysts noted.
"Among the large integrated steel mills, SAIL has the highest proportion of long products as most of the long product demand in India is met by the smaller sponge iron/induction furnace manufacturers."
Source: DNA India
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