Sharp rise in raw material prices makes steel costlier
   Date :01-Sep-2020
Business Bureau ;
The steel prices have increased due to sharp rise in raw material prices even though there is lack of demand in the city market. The raw material like green pellet and iron ore extensively used in the manufacture of steel is being exported in large quantities to China. “In the current scenario, the raw material prices have almost doubled due to exports to China. This has resulted in short supply of raw material thus pushing up steel prices by 8 per cent to 10 per cent even though there is a big drop in demand in the local market,” said Rajesh Sarda, Vice-President of Steel and Hardware Chamber of Vidarbha while speaking to The Hitavada on Monday.
He further said that the raw material prices have shot up by Rs 5,000 per tonne as compared to steel prices which have advanced only by Rs 2,000 per tonne. The finished steel prices have not increased at the same pace of raw material prices as there is lack of demand in the market. “This has squeezed the profit margins of steel manufacturers,” he said. China used to import large quantity of raw material for manufacturing of steel from Brazil, but due to lockdown in that country the imports have stopped. On the other hand, Chinese steel manufacturers are operating at full capacity as their Government is giving big push for construction of infrastructure projects. Accordingly, it is the reverse in India, where the steel manufacturers are operating at 50 per cent to 70 per cent capacity.
Also, many steel plants have not started operations due to financial and labour problems, he pointed out. Sarda said that the demand for steel or TMT bars has fallen by 75 per cent as compared to March as construction activity has dropped significantly due to the lockdown introduced by the Government to contain spread of coronavirus COVID-19 pandemic. Currently, there is very small demand mostly from ongoing Government projects which are being implemented at a snails pace. The basic demand for steel comes from builders, contractors.
While in retail, the demand is mostly from the people who construct their own houses. He said that the Government needs to start functioning and address the sanctioning issue of builders and contractors. Most of the upcoming projects of builders for residential and commercial projects are not being sanctioned or cleared by the authorities. Apart from this, the COVID-19 pandemic has made things worse as several officers are not available for consultation and feedback most of the time. The Government needs to raise demand quickly to provide relief to the steel industry, he added.