The dream of owning a house or car is becoming expensive. The biggest reason for this is the cost of steel. In the last one month, due to an increase in construction and increasing demand from the automobile sector, its prices have increased by more than 2 per cent. Its demand has not only increased from building construction and automobile sector, but it is also basic goods for other products like heavy machinery, trains, aircraft and weapons. The futures price of steel long on the commodity exchange is running close to 41,450 while its spot price is running at Rs 40,850. The spot price of Steel Long is from Mandi Gobindgarh. According to market experts, by the end of this year, its price can show a level of 45 thousand as its demand is increasing continuously and due to Corona epidemic, its shortage remains. Industries are also hoarding due to the possibility of a second wave.
The steel industry is the core of global development. It is considered important for economic development and is considered the backbone of human civilization. The importance of how important the steel economy is can be gauged from the fact that ‘consumption of capita’ measures the standard of living standard and socio-economic standard of the people living in the country.
Steel prices increased due to these reasons
- Last year, 2020 remained a lockdown for most of the year due to the worldwide corona epidemic. The situation has not been normalized yet. It also has an impact on steel production. Still all the steel production plants are not functioning at full capacity due to which its shortage has been maintained.
- There is still fear around the world about Corona. According to Anuj Gupta, Vice President (Commodity and Currency Research), IIFL Securities, due to this, most of the industries are emphasizing to buy more and more steel. Steel prices are getting stronger due to this aggressive buying by companies.
- China is aggressively buying steel. In 2021, China imported 17.4 percent more steel in January and February this year. China’s aggressive buying is set to continue as it may cut production to implement its carbon peak action plan by the 2030 calendar year.
- The Tangshan government (China) issued a second-level pollution alert and asked heavy industrial companies, including steelmakers and coking plants, to cut production.
- In the US and European markets, steel prices have gone to a 13-year high because supply is not being able to meet the demand. According to data provided on the website of the World Steel Association, steel production in the United States and the EU has decreased. According to the data given in January 2021, steel production in the US decreased by 9.9 percent year-on-year while in the EU by 0.4 percent.
- In India, construction work is going on in full swing, due to which the demand for steel has increased. Its demand has increased for automobiles, white goods and consumer durables. Due to lack of supply according to demand, its prices are increasing.
No production according to demand
According to the Kedia Commodity Report, domestic steel production stood at 103 million tonnes in the current financial year, of which 94 million tonnes have been consumed. Economic activity gradually began to normalize after the lockdown imposed due to the Corona epidemic gradually began to normalize, followed by 10 million tonnes of steel consumed in December 2020-January 2021 last year. According to the way consumption is, in the next financial year 2021-22 there will be a demand of 120 million tonnes of steel.
In terms of production, according to the data given on the website of the World Steel Association, the annual production of steel in India increased by 7.6 percent in January 2021, while in China it was 6.8 percent. However, according to the demand, its shortage is happening. Demand has increased in the US but production declined by 9.9 per cent. In January 2021, the world production of 16.29 lakh tonnes of steel was made, which was just 4.8 per cent more on an annual basis.