Indian steel mills have cut steel prices twice in the last 30 to 40 days in line with lower international prices. Mr J Mehra director of the Essar Group commenting on how that has impacted the Indian steel sector speaks exclusively to CNBC-TV18.
Q. What do you think is going to be the trajectory going forward, you have already seen two price cuts, do you think before the year is out there can be more of these?
A - I would say what cuts had to be given have been given. In the meantime the international prices have started firming up and there has been an increase of USD 25 to USD 30 in the last two to three weeks in the international markets. So to the extent of the pressure which was there on the Indian pricing, I think that is taken off now. Going forward I believe which have been corrected and there was a correction in the Indian pricing and what has been corrected should hold on. I don’t see much pressure coming up on the next month on Indian pricing.
Having said that I believe that the demand internationally should show some signs of improvement going in first quarter next year that is January to March that should firm up the prices still further. Also there will be a renegotiation of the major input pricing like iron ore and coal in the beginning of the next year. We have to watch as to what happen with that pricing. If the prices, as expected, go up in those commodities, it will certainly stabilise the steel pricing much more.
Q. If you can take a broad sweep in the next 12 months, that is in 2010 we still see large capacities in the steel sector globally one of the most debilitated sectors, what is your forecast or what is your expectation for all of 2010, do you think it will still be a year of tough calls for steel prices in 2010?
A - I believe there will be two different worlds altogether in the steel sector there will be America and Europe, who would be behaving in a different pattern altogether and I have a feeling going forward, they will find the year 2010 still very tough to deal with. Also, they won’t be able to have any surplus capacities where they can come into the markets where there is a demand like Asia. There would be demand in this part of the world and India is well poised from the demand growth point of view.
Right now even this year we are growing in the flat rate of 10%. I expect the demand to grow around 12% or so next year because a lot of investment we see coming in the infrastructure sector. And the way the entire investment is being made today in the sector such as power, roads and ports we can see the pull in these areas. So whatever may happen to those markets, I am not really much worried about the impact of those markets on the Indian market.
Having said that, there is only one thing one has to be worried about is that is China they have been making lot of investment during this period in developing infrastructure. And that has been one of the major reasons there has been a demand pull in terms of steel, internationally. It hasn’t shown in overall figures, globally it has dipped as much as it was projected. But that is basically on the demand which has risen in China and India based on the stimulus packages these two countries have put in place. If that stimulus package is not kept on, that can be very dangerous that is the only danger one needs to look at not really the developed world as an issue.
Q. You have recently made a very big investment in the value added space Shree Precoated at INR 1200 crore is that the space you see good demand off tick the galvanized space and even what sense is your trajectory on iron ore prices and coke prices going forward?
A - Right now the iron ore and coal price compared to last year have gone up in the spot markets. Going into next year when they go for the longer term contract there would be pressure on these prices and that would bring some stability in the steel pricing. We have taken over Shree Precoated obviously from the point of view that we are growing; we will be around 10 million tonne next year of steel making capacity with the commissioning of the all new units that have started now. It was important for us to increase the product basket and therefore we have added up Shree Precoated as a product basket of value addition in the sense they have 400 tonne capacity of the colour quoted which we didn’t have, so that is a definite addition to our total product basket.
(Sourced from http://www.steelguru.com/news/index/2009/11/20/MTIxNDQx/Essar_Group_expects_pressure_in_iron_and_coal_prices.html)
Thursday, November 19, 2009
Essar Group expects pressure in iron and coal prices
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