Here is why steel prices could stay high for a while

Steel prices are on a high globally. The industry chamber CII (Confederation of Indian Industry ) yesterday said that it was conscious of the growing concerns among the micro, small and medium enterprises for the rising steel prices in the country.

Paul Bartholomew, senior managing editor at S&P Global Platts, on Tuesday, said that the supply constraints in the US and Europe will keep steel prices elevated.

Speaking in an interview with CNBC-TV18, he said, “We are seeing different performances in different markets. There is still a lot of upside in the US and Europe, maybe due to supply constraints and in China, we are seeing things starting to plateau out a bit and are expecting a softer second half of the year.”

The rise in global steel prices is linked to China, a crucial supplier and consumer of commodities. Beijing’s move to limit capacity fuelled worries about a supply shortage and prompted speculative buying.

It is expected that the Chinese demand will soften in the third quarter of the calendar year (CY21) owing to seasonal factors and regulatory action.

Rakesh Jhunjhunwala, a partner at Rare Enterprises and renowned investor, believes that the commodity ‘supercycle’ has just begun and it can last for the next 5-7 years.

“Today steel prices are 20-25 percent higher than the average realization of last quarter. Companies could see earnings of Rs 200-300 per share,” he reasoned.

It is noteworthy that domestic steel prices continue to remain at a sharp discount of 15-20 percent compared to international steel prices. This indicates that there is room for a further price hike.

“Steel producers are likely to cover up the lost production in the subsequent months and therefore there is no change in our annual crude steel output forecast of 9-11 percent growth for FY22,” Care Ratings said in a report.
Source: CNBC TV18

This article has been posted as is from Source

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