It’s been a year since the Ukraine-Russia war began, but its effects are still lingering, as raw material prices for steel companies are rising sharply due to trade volatility, increasing their production costs . At the same time, many major economies are still waiting for demand to improve.
Russia and Ukraine are the major producers of steel and raw materials in the world. In the year 2021, steel exports from these two countries will be around 48 million tonnes, and they will contribute about 10 percent of the global steel trade. And in terms of production, from iron ore and pellets to coal and metallics, these two countries account for the bulk of the total raw materials.
Russia exported about 32 million tonnes of coal during the year 2021. Hetal Gandhi, research director, Crisil Market Intelligence & Analytics, said, “With Europe not buying coal from Russia, the country focused on increasing its exports to China, which led to a boom in exports in 2022.” Problems in the supply chain also led to a sharp rise in coking coal and steel prices worldwide, which affected demand.
Demand has been hit due to global concerns, with steel mills grappling with the problem of stockpiling of high-cost raw materials, forcing them to make losses rather than profits. Its impact was clearly visible in the performance of the second and third quarter of FY2023.
cost of production
Jayant Acharya, deputy managing director, JSW Steel, said, “If we look back, supply chain-related disruptions have led to a rise in commodity prices. With the changing times, there has been some moderation in the prices, but still some of the costs remain high and they may remain so for a long time.
They believe that coking coal prices, for example, have remained at elevated levels. “Thermal coal prices have softened but are higher than pre-Covid levels, as are non-ferrous metals,” he said. We are entering a high-cost production structure.
Ranjan Dhar, chief marketing officer, ArcelorMittal Nippon Steel India, believes that steel mills’ margins remain under pressure due to the high cost of coking coal.
steel prices
As the war drags on, global sentiment is improving somewhat. “The impact of the war is showing and now the pressure on demand in Europe is easing and people are buying again,” says Dhar.
Its effect is visible in the prices. Globally, prices have moved up to $120-150 a tonne since December. Steel prices in India started rising from late December. Earlier in November, the lowest level of prices was seen since March 2021.
According to Crisil, steel prices are at a 7-month high. The average price is around 59,000-60,000 per tonne.
positive trend
On the demand front, the Indian market has strengthened. According to Gandhi, India’s steel demand is likely to remain high and is expected to grow by 10-12 per cent in FY2023 and 8-10 per cent in FY2024. Gandhi believes that as far as global demand is concerned, The question is, will demand improve in the second half of 2023.
