SMM7, March 7: due to weak domestic demand and COVID-19, the domestic steel industry has been affected by adverse factors over the past few months, despite low profit margins on exports to China, but still benefited from the growth of exports to China, according to a report from the Indian rating agency.
Analysts believe that the growth rate of India's steel exports may slow in the next few quarters. Export prices fell slightly. Analysts further point out that the quality of export products is skewed towards low-margin products. Weak overseas demand will also slow export growth in the coming quarters.
"Export channels face two pressures: first, China's steel demand may be weakened by seasonal rains / floods and a slowdown in construction activity, and second, because countries have exhausted their annual quotas in the first few months," analysts said in the report. The EU will adjust country-specific steel safeguards to quarterly quotas. "
Steel consumption remains weak. Domestic consumption in India fell worryingly by 57 per cent in the first quarter from a year earlier. Finished steel inventories remain high, even if profit margins are lower than in May. This is expected to depress sales in the coming quarters. Part of the improvement in domestic demand is due to the rural sector. However, a full recovery is still difficult to achieve.
"in our view, sluggish domestic demand is a major concern for steel prices," analysts said in the report. Relatively strong international prices have not had a continuous impact over the past seven weeks due to weak domestic demand. In addition, there is a lack of cost promotion in the domestic market, where iron ore prices are 30 per cent lower than they were three months ago because of the fall in coking coal prices. "
It is expected that by the second quarter of 2020, the amount of domestic steel realized in terms of the cost of hot rolled coil and rebar raw materials will decline further, and steel prices will fall further due to oversupply. With the relaxation of locking restrictions, the demand for steel has not increased accordingly.
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