Steel price growth should correct in the second half of the year

According to CARE Ratings, global steel prices will decline in the second half of 2021 due to reduced steel supplies and normalized economic conditions.

The rating agency's report said the global market saw a 15% increase in steel production in the first half of 2021 compared to the same period last year, mainly driven by the steel giants China and India, thanks to eased restrictions and strong market demand.

Amid the restrictions and the slowdown in the pandemic, global steel prices rose sharply, largely due to a supply-demand mismatch that resulted from a sharp recovery in demand. Steel mills not only struggled to anticipate a sudden surge in demand, but also struggled with supply-side logistics when sourcing key raw materials.

The Indian steel market saw a decline in demand due to the second wave of COVID-19, but it is expected to recover from the rainy season, mainly driven by demand from the infrastructure and construction sector.

Domestic steel supply is currently hovering around a short-term marginal discount to world prices, as domestic steel producers believe any further price increases could reduce current sales. This discount is likely to disappear after international price adjustments.

Large Indian steel companies should continue to benefit from the export market thanks to favorable prices derived from low domestic iron ore prices and a competitive edge from China's low export volumes.