NEW DELHI : Subdued demand and weak international prices of steel will continue to impact prices of the commodity in India, said industry experts. Restricted construction activity during the monsoon led to muted domestic demand in the September quarter, while slowing global economies and rising interest rates are adding to the concerns over global steel demand and pricing, they added.

Demand from China, the world’s largest consumer of commodities, is also muted, following a real estate crisis and covid-led lockdowns. As a result, analysts are not too optimistic on the sector for the near term.

Duty exemptions on exports is leading to higher domestic inventory, but the government may not withdraw it soon, said analysts. Domestic prices of hot-rolled coil (HRC) steel, used in automobiles and home appliances, rose 23% during the January-April period, but have since fallen 28% to ₹57,000 a tonne, 9% lower than the June quarter average, said Jefferies India Pvt. Ltd. in a 25 September report. Though domestic steel prices are 6-11% above import parity, Jefferies expects more downside risk.

With China witnessing subdued demand and rising exports, steel prices may be under pressure. Chinese steel exports were up 21.8% from the year earlier in August, while demand fell 4%, said Nomura Research. Steel exports in August was higher compared to the corresponding months of 2018 to 2021.

With average steel prices down sequentially, margins of Indian steel makers may have peaked in the June quarter. High input costs, especially coal, are likely to add to concerns on their margins. The saving grace, however, is falling debt levels of companies due to a favourable steel cycle in the earlier quarters. Therefore, lower interest costs will continue to support earnings.

The duty on steel exports by the government in May helped bring down prices, but led to surplus inventory.