Already at a 12-year high following around Rs 2,500 per tonne increase effective December 1, the price of hot-rolled coil (HRC), the benchmark steel product, is expected to go up further during the month by at least Rs 1,500 a tonne. This is on the back of rising domestic demand and iron ore prices, higher international prices and subdued production and limited imports, analysts said.

After the December price hike, the wholesale price of HRC (ex-Mumbai) currently stands at Rs 48,300 per tonne, the highest since 2008, according to SteelMint. The current price is around 32% higher than that of July, 2020. According to Morgan Stanley, “The increase for December was largely anticipated, but our dealer checks suggest there is potential for yet another hike in mid-December.” It says since the domestic HRC prices, even after the December hike, are at a 6% discount to import parity prices from China, a hike of $20/tonne (around Rs 1,500) appears achievable so long as international prices are holding up. However, it did not rule out “a higher increase potentially”.

Increase in international prices, tight demand/supply situation, as demand is improving faster than production and rising raw material costs (iron ore) given production disruption in Odisha are driving steel prices higher, Morgan Stanley said.

Icra’s Jayanta Roy said that HRC prices have strengthened in the international market by nearly 18% in the last two months leading to a significant rise in the Indian steel prices.

Domestic steel firms are attributing the northward movement of the steel price to the rising iron ore prices, which have gone up multiple times in the recent past. Domestic miners mainly take cue from the NMDC for effecting any revision in the price of the key steel-making raw material.

From May onwards, the state-run miner has been constantly raising the price to take it to Rs 3,450 per tonne from Rs 2,250 a tonne in May. In November, it raised the price twice. With effect from December 2, NMDC raised the price for both lump and fines ore by Rs 500 a tonne to Rs 4,500 per tonne and Rs 4,110 per tonne respectively.

Limited import opportunity is also keeping the prices high. Japan and Korea have now started exporting more to Europe since realisations are better in these countries compared to India. In addition, domestic demand in these two countries is also buoyant now.

The rising trend in the domestic price of steel is expected to continue till China devours all its steel in the domestic market leaving other countries which used to depend on China for steel to look out for alternate sources including India, the supply of iron ore becomes regular in the domestic market and secondary steel producers resume normal production.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.