Global steel prices have corrected 28 percent over the past 6 months, while domestic steel prices are down 7-14 percent. In an interview to CNBC-TV18, RK Goyal, MD, Kalyani Steel, discusses on the outlook for steel prices going ahead.
Below is the transcript of RK Goyal’s interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.
Reema: Domestic prices while they have fallen, they are still lagging the fall that we have seen in international steel prices. Do you expect domestic steel prices to come under further pressure from now?
A: First of all the correction in raw material prices, what has happened globally has not happened in India particularly in iron ore prices. While global iron ore prices have come down from almost USD 110 per tonne to USD 50 per tonne while in India it is only come down by few Rs 100 per tonne as there is a shortage of iron ore in the country and fairly large number of mines are still closed after the ban by Supreme Court. So, the cost in India has not gone down to that extent. There is tremendous pressure because of dumping by various countries including China and due to that pressure maybe some minor correction will be done subsequently.
Sumaira: Amongst this iron ore we had seen a while back NMDC – since October last year they had been cutting prices close to almost 30 percent now, it still remains above that Rs 3000 per tonne mark. How much lower would this have to be for it to become viable for a company like you to buy? A: First of all if you look at prices in Karnataka, the reduction was what we were indicating has not happened. At the same time there is an increase in royalty to 15 percent. So, you have to add royalty, you have to add FDT, you have to add the local transportation cost and all. It is still the landed cost of iron ore, lumpy ore to our plants is almost Rs 5400-5500 which used to be close to Rs 6000. So, there is not a substantial reduction. In addition to that in coke there is an import duty which was imposed in the last Budget of 2.5 percent. Additionally there is an increase in cess on coal. So, all these things have increased the cost also. So, overall there is no substantial reduction in the cost in the domestic market particularly in Karnataka. As far as the manufacturers are concerned, they are squeezed very badly. On one hand there is not much cost reduction and on other hand we have to reduce our prices and face this dumping from various countries including China.
Reema: The big threat for the domestic industry is this dumping of cheaper iron ore as well as steel from peers like China? A: The finished products which are being dumped, iron ore doesn’t make sense because of very high logistic cost. Our ports are not capable to handle such bulk raw materials efficiently. So, iron ore imports are still limited. However, very large imports of steel are already there particularly in engineering steel’s long products the imports have gone up by almost six times; it is 600 percent increase. Overall imports of iron ore and steel products has gone up by more than 300 percent, so, this is affecting the industry very badly.
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