Supply-hit ingots steel the march

MUMBAI: A huge demand and supply mismatch for steel ingots is propping the price of the raw material, which has risen by over Rs 500 in the last few days on NCDEX.

Also, growing power shortage across the country is expected to keep the secondary producers from functioning at full capacity, adding to the supply crunch. The April contract has appreciated by close to 9% since the beginning of 2007
The price moved up from Rs 20,949 per tonne on Thursday to Rs 21,456 per tonne on Monday in the April contract on NCDEX.

The open interest has almost doubled from Thursday’s 2,640 tonne to 4,390 tonne. According to the joint parliamentary committee report of the ministry of steel the production between April ‘06 and February ‘07 grew at 10.2%, while consumption grew at 11.3%.

Cold Rolled Steel Manufacturers Association of India (Corsma) general secretary SC Mathur said, there is an acute shortage of billets and blooms in the peak construction season between April and July. Meanwhile the price of hot rolled coils have risen globally. Despite steel companies rolling back price hikes announced in March by Rs 500 per tonne, secondary manufacturers claim that price cuts have been lower than this in actuality.

Supreme Group MD JK Arora said, “The price of hot rolled coils are still high, and it is quite evident that the government is pressurising the steel companies not to hike prices. Companies are assuring that they would not do so through April.”

The power cuts in Maharashtra and other states, he said, would force certain secondary manufacturers to reduce output. This could further tighten supplies.

Beside, the shortage of iron ore and sponge iron scrap, both raw materials for ingots, are making the production of ingots expensive. In spite of an export duty being imposed on iron ore, the supply is not enough to cater to the demand.

There is already a gap of about 1.5-2 million tonnes between the demand and supply of hot rolled coils and the products made from it, including cold rolled sheets, galvanised steel and tinplates.