| Date: |
25-07-2015 |
| Subject: |
Bank of America Merrill Lynch says large Indian steelmakers hold on to prices despite fall in China |
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MUMBAI: Bank of America Merrill Lynch said large Indian steelmakers like Tata Steel, JSW Steel and Steel Authority of India Ltd are holding on to steel prices despite a continuous fall in prices in China.
Chinese steelmakers faced with poor demand in home country are dumping their access steel production into the world market, including India, for almost a year now. Price undercutting among Indian steelmakers to beat Chinese steel in a subdued demand environment led to a sharp fall in profits across all Indian steel companies.
"Recently, steel prices have fallen in China, but remained stagnant in India. Consequently, Indian steel prices are at a 5% premium to imported steel costs. The current premium on domestic steel is in line with the price premium of the recent past," analyst Satish Kumar wrote in a report.
He, however, added that smaller steel producers were giving discounts on cash purchases as many of them were suffering from acute cash-flow shortages. Because of the price drop at smaller steel producers, the difference between big and small players' steel prices has reverted to its historical mean of 13-15%, the report said. In the recent past, this difference had fallen to 6-7%.
The brokerage said the government should increase import duty or impose safeguard duty to protect domestic steel industry. "Our interaction with government officials, as well as the fact that much of the industry may not be able to service debt in the near term, suggest there may be evidence of material injury to domestic steel players, in our view," Kumar wrote in the report.
Source : economictimes.indiatimes.com
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