The splendid run in long and flat steel might be escalating in the coming days. Going by the direction and mood of Supreme Court in recently it seems iron ore production will be curtailed severely after scrapping of all deemed lease after 2007.
Judgment on Goa mining heralding peril today’s observation on Orissa mining inched closer to disaster. SC firmly indicated at Goa-style ban on all mining in Odisha for three months till the state government sorted out all mining illegalities and granted fresh leases.
Suspense remained with the court reserving its order. Of the 56 operating leases in Odisha, 26 fall under second and subsequent renewal. This include six of Tata Steel's iron and manganese leases and three of SAIL's, leases held by Roongta's mines. Aditya Birla group's Essel Mining, a mine owned by KJS Ahluwalia and two mines owned by state-owned PSU Orissa Mining Corporation.
In Goa the permission to mine 20 million tonne will be ineffectual as except for Vedanta-Sterlite most of the other miners will suffer the axe.
If this were to come out true Indian steel mills will be starved of iron ore and sponge iron leading to production shortage as the capacity utilization will decline. Odisha caters to nearly 50% of iron ore production in the country.
The secondary sector contributes nearly 30% of crude steel production but more than 60% of long steel production. This sector is dependent on imported scrap (4.5 million tonnes) and sponge iron about 23-24 million tonne. Moreover the primary sector steel production is solely dependent on iron ore.
Indian steel price have gained 4% since January. Trend remains up as the cost of production has led to hiked conversion cost by INR 1000-1500 per tonne from scrap/sponge iron to ingot and TMT.
Imported Scrap offers from European suppliers have gone upto USD 8-10 per tonne on anticipation of GRI (General Rate Increase) on freight of container transportation from Europe to Asian countries to be implemented in the month of May ’14. Moreover with domestic consumption of scrap going up in European and US market its availability is likely to be restricted in the coming months .Current offers are hovering at USD 385-390/MT CFR Mumbai against USD 380-385/MT CFR last week for HMS 1&2 and USD 405-408/MT CFR Mumbai for Shredded Scrap.
Flat steel price levels despite looming threat from cheap Chinese imports has maintained parity gap of around INR 3000 per tonne and is unlikely to decline in the coming days if shortage becomes reality. Moreover with summer demand from white good sector picking up price will be ascendant.
In all steel market in India is held on tenterhooks by the Supreme Court rather than by market fundamentals of demand and supply. Heady days are ahead for the steel price levels. Moreover with stable government being formed the prospects of economic and monetary reforms becoming brighter demand from construction, auto, white good sector will pick up giving much desired traction.
Source:- steelguru.com
No comments:
Post a Comment