Steel prices can't shrink any more

India’s steelmakers, already troubled by a squeeze in margins, will not be able to withstand any further fall in steel prices, said SK Roongta, chairman of SAIL, India’s largest steel producer. Net margins of most steel companies have shrunk to the lowest levels and it’s impossible to cut steel prices without a significant fall in raw material prices, he said. “Steel prices can fall further only if there is a drastic cut in long-term contract price of coking coal and iron ore. The prices will stabilise after the conclusion of these longterm contracts,” Mr Roongta said in an exclusive interview. There is scope for a fall in coking coal prices from the current $100 a tonne to around $80. “If this happens under a long-term contact, companies can cut steel prices,” said Mr Roongta. Coking coal prices in the spot market is hovering around the $160 mark. Steel prices in the country have fallen by over 40% since September 2008. Prices of both structural steel (used by the construction sector) and flat steel products (used by the industry ) have fallen below the Rs 30,000-atonne mark from an all-time high of Rs 50,000 early last year. Several steelmakers have said that prices have bottomed out. The SAIL chief said global steel consumption has already slipped by about 10%. The forecast for India, though, is a bit positive with no fall seen in steel consumption in 2009. “Some steel products such as galvanised sheets and coated products may be affected during the year due to their dependence on export market,” Mr Roongta said. Housing and capital goods sectors would remain sluggish for the next six months keeping steel demand low and putting prices under pressure. “The government has to boost demand by initiating new projects in the infrastructure sector,” he said. SAIL is committed to complete its expansion programme, he said.