Prices for metallurgical raw materials will remain stable

Steel prices are likely to move in a narrow range during 2018-19 due to increased pressure from major producing countries.

A recent study by India Ratings and Research predicts prices for steelmaking raw materials, including iron ore and coking coal, to remain constrained during the current fiscal year. The study estimates a benchmark iron ore with 62 percent Fe in Qingdao, China, to average $ 65 per tonne over the current and next years. Likewise, prices for coking coal (imports from Australia to China) are likely to average slightly lower by $ 170 per tonne for the current year.

Domestic iron ore prices are believed to have increased due to higher demand for steel in the country. In addition, the suspension of operations at mines in Odisha due to non-payment of fines for illegal mining also led to price increases in January 2018.

Taking the opportunity, the state-owned NMDC raised iron ore prices by 5 percent - with chunk and fines prices raised Rs 150 to Rs 3,200 per tonne and Rs 2,810 per tonne, respectively, about two weeks ago. Iron ore prices continued to be quite volatile this fiscal year as NMDC first cut them into Rs 100 in April before lifting them intermittently over the following months.

Moderate coking coal prices will depend on increased production in Australia and the United States. The recent tropical cyclone season (November 2017 - April 2018) in Australia was nearly normal.

The high cost of raw materials will lead to a proportional increase in the cost of production, as a result of which domestic steel plants will transfer costs to consumers.

During the 2017-18 financial year, steel production in India increased by 3.1% to 105 million tonnes, while consumption increased by 7.9% to 90.7 million tonnes. The upward momentum in production and consumption is expected to continue throughout the current fiscal year.