Local steel makers are cutting prices to avert loss in market share as cheaper imports from China, Korea and Japan flood the market.

Hot-rolled steel prices dropped by Rs.3,000-4,000 a tonne in the April-June quarter, said Vikram Amin, executive director, strategy and business development, Essar Steel India.

As on 1 July, the average price of hot-rolled steel was Rs.36,100 per tonne in Delhi, according to data available with the Joint Plant Committee (JPC) of the steel ministry.

This, industry experts and traders say, has led to a gap between the landed cost of imported steel and domestic steel prices narrowing down in the last few months, a clear indication of steel companies focusing on volumes and giving up on margins.

During the March-April period, the landed cost of imported steel in the hot-rolled category in India was lower by about Rs.2,000-3,000 per tonne, said Ajay Srinivasan, director, Crisil Ratings. This gap, Srinivasan said, has narrowed to Rs.1,000 per tonne now.

Vivek Gupta, vice-president, Indian Chamber of Steel, and a leading steel dealer in Mumbai said for a broader category of steel products, the difference between imported and domestic steel prices has narrowed from a range of 15-20% in April to 5-15% now, depending on the product category.

Amin from Essar added that the domestic steel price correction is a result of cheap imports and the depreciation in the currencies of various steel exporting countries.

According to JPC data, total finished steel imports by India rose 53.1% in the April-June period on a year-on-year basis. The average spot price of hot-rolled steel sheets in China, a major exporter for steel to India, corrected 12% from April to June-end.

“There is a surge in volumes in imports due to dumping, resulting in squeezing the margins of domestic companies,” said Jayant Acharya, director (commercial and marketing), JSW Steel Ltd. He did not share details on the steel price movement as the company is in its silent period ahead of its earnings report next week.

JSW Steel produced the highest ever quarterly crude steel volume of 3.4 million tonnes for the June quarter, it said in a statement on 13 July. The company is yet to disclose the sales figure for the same period.

Tata Steel Ltd said its sales volumes for the June quarter rose 2% to 2.14 million tonnes in a statement sent to BSE on 9 July. “Being an industry with high capital investments and hence high fixed cost, focus is generally on increasing capacity utilization to recover maximum fixed cost and improve margins in spite of reduction in prices,” said a SAIL spokesperson.

“Falling international steel prices have affected domestic prices of steel. The average price realisation for SAIL has dropped by 17.4% in the June quarter with respect to the corresponding period last year,” the SAIL spokesperson said.

Srinivasan of Crisil Ratings explained, “Notwithstanding the weak rupee and rise in import duty, domestic steel makers are under tremendous pressure with steel prices falling globally. Domestic steel makers have been forced to bring down prices, focusing on volumes than margins.”

Jimesh Sanghvi, an analyst at IL&FS Broking Services, in a 9 July note said the drop in steel prices will adversely impact integrated steel players such as Tata Steel and SAIL.

Some expect pressures on margins to continue in the September quarter.

Srinivasan expects global steel prices to fall below $370-390 per tonne. “This (global price correction) will force domestic steel companies to follow suit,” Gupta said. In addition, July-September is a weak quarter for steel companies.

“The demand and prices start to pick up after October. We expect the same trend to continue even this year,” said Amin.