Domestic flat steel prices likely to face temporary pressures from cheap imports: Icra

KOLKATA: An impending threat of higher imports from free trade countries like Japan and South Korea is poised to rein in domestic steel production and put temporary pressure on steel prices in the January -March quarter of FY2019. Combine with a steep fall in international prices this is likely to force domestic flat steel manufactures to opt for a downward revision in prices.

"The threat of cheaper flat steel imports to India in the near term has increased and, as a result, domestic flat steel producers may have to brace for a downward revision in prices, especially in Q4 FY2019 (fourth quarter of 2018-19 fiscal)," ratings agency Icra said in its latest research report.

Chinese hot rolled coil export offers have declined from USD 560 per MT in the first week of October to USD 477/MT at November-end.


A major reason for the sharp correction in prices is the ongoing oversupply concerns in China during winter, Jayanta Roy, senior vice-president, Icra said. “We believe that seaborne steel prices would remain soft in the coming months. However, a typical pick-up in Chinese demand post the winter months is likely to lead to a recovery in international steel prices in the next fiscal", he added.

Even after a sharp fall in international steel prices, anti-dumping duties in India in India on flat products do not kick in at the current price levels. As a result, steel imports, especially from free-trade countries such as Japan and South Korea, are likely to remain high in the coming months, which would keep domestic steel production growth under check, Roy added.

"While the domestic hot-rolled coil prices are currently trading at a marginal premium over imported prices, we believe that the steep reduction in international steel prices recently would make steel imports cheaper from January 2019 onwards, when these shipments start hitting Indian shores, and would, in turn, exert pressure on domestic steel prices in the fourth quarter of FY2019," he said.