Global prices of steel have been on the rise in recent weeks on expectations of higher demand from China as the country eased its strict Covid-19 curbs. Indian steel mills also hiked prices in tandem, reaching around ₹61,000-62,000 per tonne for benchmark hot-rolled coils of steel. The domestic prices were around ₹55,750-57,000 in January.
However, taking a contrarian view, Rao said that considering China is now focusing on consumption-led growth rather than investment-led growth, demand for steel will be lower than market expectations. “The kinds of price hikes which you’re seeing across the globe are driven by the opening up of the Chinese economy and the shift in zero-Covid policy. But this is just a blip and there will be correction in prices,” he told ET. “Already there is an accumulation of inventories in China.”
Demand from the Chinese infrastructure segment, which was on a debt-funded growth frenzy over the past several years, is also slowing down. Chinese local government bodies, which led the construction boom, have found themselves under tremendous pressure to repay debt maturities and lenders are not keen to bankroll them anymore, as per reports. This will result in lower demand for steel from China, Rao said. A correction in global prices could happen as early as April, he added.
Another key monitorable affecting steel prices in the coming weeks will be the cost of key inputs like iron ore and coking coal.
