After a strong demand season, expects marginal softness in demand, especially in long products used in the real estate and infrastructure projects, while that of flat products remains strong.
TV Narendran, CEO and Managing Director, Tata Steel told businessline that the SME sector is starting to feel a little bit of stress, not just because of steel prices, but because all input costs have gone up for both steel producers and customers.
“In flat products, demand is still quite strong because the auto industry is going strong, but we don’t know if the fuel price increases will have an impact going forward,” he said.
However, in long products, construction activity has slowed down a little bit more, with people returning to their home States to vote, creating some labour shortages, he said.
“Long products may be feeling a little bit more of the demand pressure than flat. Otherwise, I think demand is still quite okay,” he added.
The company expects steel prices to remain strong on the back of a rise in raw material costs. Despite the price increases, Narendran said the landed cost of steel imports is higher than domestic prices by over ₹2,000-₹3,000 (a tonne) and, hence, imports are not such a big threat yet.
In the last three weeks, hot rolled coil prices in China and ex-China have gone up by about $20-$25 a tonne. Moreover, Iran used to export a lot of slabs and billets, and this has come to a halt after the war. China has stepped into that space, bringing better balance in international markets now than it was three months back, he said.
While China still exports 9 million tonnes or more of steel per month, the pressure from China is a little less as they have also introduced licences for exports, said Narendran.
Steel prices for flat products went up in April and stabilised at a certain level. “We expect June quarter realisations will be about ₹6,000 a tonne higher than Q4 in India. And even in Europe, steel prices have gone up quarter-on-quarter by about €80 and about £80 in the UK,” he said.
Similarly, costs have also gone up due to a rise in input costs in India, the exchange rate and the impact of the West Asia war, he said. Not all price increases will translate into EBITDA profit, but overall, margins should be better in the UK and India for Q1 compared to Q4, said Narendran.