Poor demand, iron ore supply problems hit steel billet market

Sadananda Mohapatra / Bhubaneswar Jun 29, 2012,
Business Standard
Poor demand from producers of long steel and raw material supply problems have choked the steel billet market in the past couple of months. Many manufacturers have either regulated production or cut prices on a bleak demand scenario.

“The reason for the price fall is simple. There is no demand for finished products in the market and it is affecting billet prices. In the past month, we had to reduce prices by Rs 1,000-1,500 per tonne,” said Rajendra Sachdeva, owner of Ghaziabad-based billet maker Shivam Steel.

Billet prices currently rule at Rs 35,000-36,000 per tonne, depending on grade and size. It is a semi-finished, long steel product, mainly sold by smaller steel plants to larger ones for producing steel meant for construction. Construction activities in the country have received a setback due to muted earnings growth and high interest rates.

“There is no demand for intermediate steel products and industrial production is not encouraging. There is no demand for sponge iron, too, as most steel companies have curbed production,” said the marketing official of a state-based billet producer. Buyers have also restricted billet buying due to the current monsoon season, when construction activity normally dissipates, he added. Spot prices of iron ore fines in the international markets came down by three to four per cent recently on poor demand. In Odisha, the largest producer of iron ore in India, prices are expected to fall in the July-September quarter, industry officials said.

However, steel industry sources said the price fall in billets was temporary, as the constraints in iron ore availability would not allow producers to reduce prices below a point.

“In Odisha, most of the state-owned and private mines are shut due to lack of statutory clearances, thereby creating shortage in raw material supply. As a result, intermediate steel producers have cut production,” said P L Kandoi, president of the All Odisha Steel Federation.

From the latest available data, India’s Industrial production in April grew by only 0.1 per cent due to a fall in capital goods and manufacturing output. Capital goods output declined 16.3 per cent against growth of 6.6 per cent in the same month last year. The manufacturing sector grew by just 0.1 per cent, much lower than the 5.7 per cent in April 2011.