Steel prices likely to rise 7.2% this year: CMIE

Steel prices are expected to rise by 7.2% this year and the rates will start firming up from October due to rise in demand in spite of weakness in international markets, economic think-tank CMIE has said.

"Price hike of the alloy is likely to begin from October.

Steel demand normally picks up when monsoon season ends and the construction activity gathers pace. We expect prices to rise by 7.2% in 2012," the Centre for Monitoring Indian Economy (CMIE) said in its monthly report.

The hike will be despite a fall in international steel prices and corrections in global raw material prices, it said.

"Healthy demand from the user industries, firmness in domestic iron ore prices and a weaker rupee are likely to aid the rise in domestic prices," it said.

However, prices are likely to remain under pressure during the July-September season as demand for steel usually weakens in monsoons, especially from the construction sector.

Besides, the steel prices in international markets will remain weak in the coming months due to unfavourable macroeconomic environment, it added.

Steel production is likely to rise at a modest pace in the first half due to constrained availability of iron ore and subdued demand, it said.

However, production is likely to pick up in the second half when the construction activity gathers pace after the end of the monsoons, it said, adding that supply of iron ore may improve once the mining activity starts in Karnataka.

Meanwhile, the finished steel production is expected to grow by 8.5%, it said.

However, finished steel prices are likely to decline further, marginally, in the coming months, it said.

Most steel companies reduced prices of finished steel products by 0.5-1% in June, in view of a steep fall in international prices.

Global prices corrected sharply during the last two months due to uncertainty regarding demand prospects of the alloy from Europe and China, it explained. However, weaker rupee restricted the downside in domestic prices.