Steel prices in India are unlikely to fall further despite a shrinking of demand on account of a general slowing down of the country's economy.
According to SAIL chairman S K Roongta, the net margins of most steel companies has shrunk to their lowest levels and any further cut in steel prices without any fall in raw material prices would render companies sick.
"No one is making net margin on sale of steel products. Steel prices could only fall further if there is a drastic reduction in long-term contract price of coking coal and iron ore. In fact the prices would also stabilise after conclusion of these long term contracts," Mr Roongta told India's Economic Times newspaper in an exclusive interview.
He said that there was further scope for a fall in coking coal prices below the $100 per tonne mark to around the $80 mark. "If this is to happen for coking coal supplies under a long-term contact, companies would also have to revise steel prices," said Mr Roongta. The coking coal price on the spot market is currently hovering around $160 mark while long term contracts are around $100 a tonne.
Steel prices in the country have fallen by over 40% since September.
On the global front, the SAIL chairman said that steel consumption has already fallen by about 10%. The forecast for India, though, is more positive with no negative growth steel consumption during the calendar year 2009. "Some steel products such as galvanised sheets and coated products may be affected during the year due to their dependence on export market," Mr Roongta said.
He said that housing and capital goods sector would remain sluggish for the next six months keeping steel demand low and putting its pricing under pressure. "Government has an important role to boost demand by initiating new projects on the infrastructure sector," he said.
For SAIL, he said, that the company remained committed to complete its expansion programme and providing assured supply of steel to consumers.
Source: Economic Times
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