Steel prices drop on softening demand

Chennai: Major steel producers on Tuesday cut prices due to softening global prices coupled with increased imports. The decrease is mainly on flat products and ranges between 3% and 5%.      Market leader SAIL has effected a drop of Rs 500 to Rs 1,500 a tonne. A senior SAIL official confirmed the price drop. "We have lowered the prices of flat products by Rs 500 to Rs 1,500 a tonne with effect from November 1. However, there is no price cut in long products,'' he said and added that the prices were market driven, clearly implying softening demand.      Essar Steel spokesperson also said that his company has lowered prices with immediate effect. "There is a 3 to 4% drop on flat products with immediate effect.''      Agency reports said that JSW Steel cuts of prices up to Rs 1,400 a tonne. "Globally prices have got corrected by about $50-60 a tonne in the last two months. Also, rupee has appreciated compared to its September level. Both the factors made us cut our prices,'' JSW Steel joint MD Seshagiri Rao said. JSW has cut prices of its flat products, consumed primarily by automobile and the white goods industry. Rates of its long steel products, used mainly by construction and infrastructure sector, has not been altered. "Long steel prices are under pressure since July. They are already low.''      Industry players downplayed slowing demand theme. "Indian market is becoming the dump yard from overseas. On a cumulative basis, total flat steel imports during the fiscal (April-August 2009-10) increased by 51% year-on-year to 2.58 million MT (mmt) versus 1.71 mmt during the corresponding period a year ago. Imports of HR Sheets/Coils in the first 5 months have reached 1.35 mmt. Clearly there is excessive flow of imported steel into the market,'' the official said.      In a related development, metal counters were at the receiving end at the bourses. The BSE metal index was down 5.95% on Tuesday's trading. Hindalco dropped by 10.50%, JSW (9.92%), Tata Steel (5.51%), SAIL (4.41%), Sterlite (6.40%) were all among the bog losers on Dalal Street. Rahul Singhvi, analyst with local brokerage Sharekhan, said, "The risk appetite of investors is reversing. Consequently, high beta stocks are not the preferred ones now. Also, a close look at the Q2 numbers shows that steel realisations are down. In the case of aluminium, the cost of production has increased and spreads have dropped. The scope of a price increase across metal categories looks doubtful.''