The export prices of Heavy Plates from European sources in 1998 exceeded the current price in 2004. And in GP the present European prices are lower than in 2003, 2000, 1998 and 1997. Apart from these two cases, the prices in other categories in 2004 are substantially higher than those ruling in 1997 although there have been years during the whole series when the prices registered a decline.

Looking at the average growth rates in prices over the last few years, the maximum increase has taken place in Billet from CIS sources, closely followed by Chinese import prices of the same item. Among other categories the rise in HR Coil import prices by China has also observed a high growth in the past. This is interesting as both these items fall in the category of basic input of a host of other downstream steel products.

In general it is seen that prices in all items went down sharply in 2002 from their levels in 2001 and 2000. No doubt the year 2002 brought in a long phase of poor demand, excess supply and low realisation with consequent adverse impact on profitability for the majority of steel producers all over the world. This also resulted in a series of protective trade measures (Section 201 and safeguard duty actions) by USA, EU and China. Global prices begun the northbound journey by the last quarter of 2002 and since then, except Q2 of 2003, they never looked back. Some analysts have commented on the years of restructuring and consolidation by major steel producers in USA and EU, the consistent efforts by OECD steel committee to bring about effective steps to cut down government subsidies for maintaining inefficient capacities. On a hindsight all these factors appear to contribute to the turnaround of the steel industry. But the primary issue remained to be the demand pull that lent a legitimacy to all the rearguard steps that various major steel producing countries of the world adopted in order to protect the ailing steel producers. The growing steel demand from China and significant expansion of domestic demand in other developing countries including India sustained the equilibrium between demand and supply and pushed up the price level.

Currently the increasing trend in prices of basic inputs for steel making like coal, iron ore, scrap and electricity as well as freight has largely contributed to rise in steel prices which otherwise would have maintained a lower growth due to damand escalation alone. The current prices of coke at US$ 125/t, of iron ore at US$ 83/t, of scrap at US$ 232/t are considerably higher than the prices ruling a few months earlier. Further there seems to be a huge shortage in availability in these basic inputs compared to demand that have necessitated the rather abnormal rise in prices of finished steel. At the current level, the landed import costs to India are much higher than those ruling a year earlier as the table below reflects.

While a 15% rise in prices in HR Coils over a period of one year can largely be accounted for by the factors mentioned above, a rise as high as 43% in the price of Billets over the same period is inexplicable. And here the issue of availability becomes the centrepiece of discussion. It is quite evident that shortage in Billets is more precarious than that in HR Coils. It is therefore a matter of days when the global prices of end products rolled out of Billets, eg Merchant and reinfocement Bars and Structurals would register a steep upward movement. CR Coils present an interesting picture. The import cost of European sourced CR Coils has not moved up in January'04. All increase has taken place in CIS sourced item. This is merely coincidental and not much significance may be attached to this. It is, however apparent that global price rise has nullified the impact of duty reduction and currency appreciation vis-à-vis dollar. The above calculation also prove that imports are no longer a viable option for the buyers since in almost all categories the domestic prices are lower than the imported price. The booming indigenous demand particularly from the new projects in the infrastructure sector and other processing industries under such a scenario would in all likelihood lead to a gradual rise in the domestic prices in the coming months.

It is a difficult choice for Indian steel producers not to export a higher component of their production and earmark more tonnages for the domestic market. The export realisation for all steel items even with a reduced level of DEPB rates is much higher than the domestic realisation. The immediate pressure is rightly felt on higher capacity utilisation in rolling facilities available with each steel producer as the current market realisation may fully compensate the full costs of production and make idle capacities simply unjustified. Massive expansion of sponge iron facilities in the country has made the EAF/IF units mostly immune from the steep rise in price of melting scrap, a phenomenon unique in this part of the globe.