A. Harikumar
Steel prices in India have shot-up along with Europe following the worsening Russia-Ukraine war. India’s domestic steel manufacturers hiked prices of hot rolled coil (HRC) and TMT bars by Rs 5000 a couple of days ago. Meanwhile the European markets have witnessed a 10 percent hike in steel prices. Industry leaders forecast prices to spike further in the coming days, as supply chains of the industry have been hit badly.
India’s national media have reported that the HRC now costs Rs 66,000 a tonne in the country; TMT costs around Rs 65,000 per tonne currently.
Why the war impacts steel industry?
Why is the Russia-Ukraine war having major ramifications on steel industry? The answer is both the countries are major exporters of steel in the global market. They also export coking coal (an essential input for making iron and steel) and natural gas, the fuel for the industry. The intense fighting in Ukraine has affected exports from both Russia and Ukraine crippling the global supply chain badly. Thus it impacted Indian steel industry also.
India depends on imports for meeting more than 80 percent of its coking coal demand. Australia, South Africa, Canada and the US are the major sources. Majority of coke is imported from Australia. However, India has recently signed a long term pact with Russia to import iron ore and coking coal to stabilise prices in the domestic market. The war is having serious ramifications on that move.
India-Russia MoU
In October, 2021 India and Russia signed a memorandum of understanding (MoU) for a strategic partnership in iron ore mining and steel production, with focus on coking coal. The goal was to diversify the supply chain of India’s steel industry. The MoU with Russia was widely expected to give leverage to India’s steel industry enabling them with a pricing advantage. Furthermore, it would have assured supplies of one of the most important inputs that accounts for 40% of the total steel production cost.
The MoU planned joint projects and commercial activities relating to coking coal. Those included the export of high-quality coking coal to India over the long term and joint development of coking coal deposits and logistics facilities in both the countries. The war has put the plan on the hold for the present and its impact is going to be felt by the construction industry.
Let this realistic statement/informations awake and open the eyes of the ruling setpups and participants in construction industry to act in time to reduce the abnormal price hike steel products, which is truly unbearable, to all.
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