As the steel prices fall in China, the Indian market is weakening even though primary producers have not reduced mill prices.

As per China Import Data, steel companies have cut down on exports with the drop in the global metal prices. The prices of steel reached a high of $939 per ton in September, and then the Chinese steel prices witnessed a decline and touched $750 in the month of January 2022.

As per the China Export Data, the steel prices in the domestic market is expected to fall in the coming months as current domestic prices are at premium to import parity. Chinese HRC prices have fallen by 20%.

Margins of Indian steel companies may come under pressure due to high coking coal prices and expected fall in steel prices. The steel companies have cut on exports with the drop in global metal prices.

The supply chain crisis got worse with China implemented a 7 week port quarantine which will further delay full recovery of the shipping industry. With the view to keep the Covid virus at check, China continues to prohibit crew changes for foreign crew and recently imposed a 7 week mandatory quarantine for returning Chinese seafarers. The vessels that have refreshed their crew elsewhere have to wait two weeks before they are allowed to port in China.

To adhere with these norms, ship owners and managers have had to reroute ships, delaying shipments and crew changes adding to supply chain crisis. The domestic hot-rolled coil prices was hiked by $3,500 a ton to $69,600 on higher coking coal prices while TMT bar prices remained flat at $48,525 per ton.

However, since the beginning of November, global steel and iron ore prices are trending lower due to weak demand. In fact steel prices are now trading at around an eight month low. The world largest steel producer China was curtailing output to meet its target to curb pollution and energy intensity. That could hurt demand in one of the world’s largest producers and consumer of raw materials.

As the steel prices are falling rapidly following months of soaring levels, a trend that is even creating pressure on certain companies, especially small and medium sized players in the sector.

The price drop came after the Chinese authorities launched a new round of measures to curb soaring prices in a bid to ease the cost of pressure on downstream industries like electronics producers. The measures while affecting certain firms in the short term will ensure long term stability for steel sector and related industries.

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