India: Input costs may further raise coated products prices by INR 2,000/t

Coated steel products may see another round of price hikes of INR 1,500-2,000/tonne (t) towards January-end or early February, sources inform SteelMint. Tin may see a higher increase since this material has not seen any change in prices for some time.

Why are coated products prices rising?
Rising input material prices are the main reasons pushing up the cost of production of coated products. Hot rolled coils, coal and power prices are a cause for concern at present. It may be recalled, a price hike of INR 2,000-2,500/t has already been announced by all players in the galvanized space to recover the coating, zinc and power costs. Colour-coated too has seen an increase of INR 2,000/t in an attempt to recover the costs.

Rise in power costs: Thermal coal prices have shot up in excess of $53-54/t in a span of around 20 days, which is severely impacting power costs of mills and eventually the conversion cost of manufacturing coated steel.

Non-ferrous metal prices surge: Material costs for galvanized and galvalume have surged of late.

Aluminium: This metal is used in galvanized steel since it helps to stall incremental corrosion. Galvalume steel gets a coating of aluminium, zinc and silicon. There has been a surge in aluminium prices. It may be mentioned that the mills' costs are based on the daily LME average. In a span of 18-20 days, prices of aluminium have spiralled up $280-300/t.

Zinc: Prices on LME are up $80-100/t on LME.

Tin: Prices have crossed $44,000/t, an increase of $4,300/t in a span of a fortnight. This material is normally acquired through monthly contracts with suppliers. But there has been an increase of $15,000-18,000/t in the last 2-3 months. Thus, tin may see even higher increase in prices.

"Paint costs for colour-coated steel have also shot up while availability is a concern," informed a source.

"These input prices have increased after the downward correction of INR 8,000-10,000/t witnessed in steel prices in the last two months," added the source.

HRC prices may rise: "Coated steel can be called a conversion. In this, hot rolled coils plus all the other materials put together contribute almost 97% of the total cost. So a price hike is imminent," emphasized the source. Mills inform that surging coking coal and other raw material prices are impacting steel-making costs. HRC prices normally get revised at the beginning of the month. The surge in coking coal and iron ore prices and increased power costs will likely raise HRC prices, which will impact the coated segment too. Thus, further prices increase is expected in the coated segment.

"If HRC prices increase, these will have to be passed on by increasing coated steel prices as well," informed a reliable source.

The additional INR 1,500-2,000/t increase in prices of coated products may enable manufacturers to just about recover the additional costs being incurred at present.

Good Q4 outlook: Domestic demand is usually good in the fourth quarter (January-March). Globally too markets have opened up post-year-end holidays. Demand-side looks positive, going forward, and coated products producers will look to pass on their cost pressures to the market.

Why are base metal prices rising?
Keeping in mind environmental and decarbonisation issues globally, many furnaces and smelters are being closed down, leading to scarce availability of these metals whereas demand globally continues to be good. For instance, demand for tinplate is good globally and in India since packaging demand is high, thanks to economic revival.

In addition, there are logistics challenges in the form of tight availability of containers and vessels and high freights.

Total market size
The total colour-coated market size in India is at around 3 mnt. Consumption ranges from 2.5-3 mnt and is expected to close the current fiscal at 2.6-2.7 mnt.

Exports comprise 0.5-0.6 mnt while cheap, low quality import are a challenge. Net of imports, production is 3-3.1 mnt.

JSW Steel is the largest domestic player in coated and colour-coated products, with a leading share in exports too.

JSW Steel's consolidated coated capacity, including JSW Steel, JSW Colour Coated (a 100 subsidiary of JSW Steel), Bhusan Power and Steel, and Asian Colour Coated Ispat (a 100% subsidiary of JSW Steel Coated Products), is 7 mnt. The commissioned colour-coated capacity at JSW Steel is around 2.5mnt, of which 0.5 mnt comprises tinplate with the balance comprising galvanized and galvalume.

JSW's domestic market share is around 32% in overall coated products and 53% in colour coated.