How is the Russia-Ukraine Crisis impacting the Indian Steel Market?

Every century, there have been wars that impacted humanity in the worst way possible, and the 21^st century is no exception. In February 2022, Russia invaded Ukraine and the share market, international commodity prices, and rates of crude oil spiraled out of control.

Global Increase in Steel Price

The Russia- Ukraine war has resulted in significant price increase in the steel price. To put this in perspective, these two countries Russia and Ukraine combined produced about 40% of all the steel in the world and exported about 45 million tons (mt) in 2021. This is about 10% of the total global steel trade.

Fluctuations in Global and Local Market

Ever since the start of the Russian-Ukraine war, international steel prices have been increasing drastically and seeing all-time highs. It has increased by 100-150 euros per ton to 1,150 euros a ton in a few weeks time. Global steel consumption has been steadily increasing but the global steel industry took a worse hit due to the rise of raw materials for steel production.

The war also widened the gap between the landed cost of steel imports and the domestic alloy prices. So much so that the gap stands at Rs 10,000/ton or 15% at the moment. Since their production is getting lower and they won’t sell to other parts of the world, India benefits from this as they can become a crucial player in the region with rising prices around the world.

Gain or Loss to the Indian Steel Industry

The Indian Steel Association has warned last week stating the rise of raw materials like coking coal and iron ore. Iron ore can be locally sourced in India, but 80% of coking coal is imported from other countries which is trading at USD 500 per ton. The Indian Government can reopen closed coking coal mines to increase the production and even use lower grade variations.

Even though there is a moderate hike in commodity prices, the global price increase of steel will benefit the Indian steelmakers. Some of the Indian firms like JSW Steel, Tata Steel and JSPL have increased the prices of steel by Rs 2,000-2,500 a ton with effect from March 1, 2021. 

Rising prices of various grades of steel might impact the industry as a whole, but it is beneficial to Indian steel companies. International companies are sourcing steel from India since the steel prices in Europe or North America are way higher than in India. Safe to say that Indian steel market players have the opportunity to operate at higher capacity utilization rates. 

With the ongoing war, reduced steel exports to other countries from Russia and Ukraine and reduced availability of steel in the international market, we can expect the rate to go even higher than they are right now. This will benefit the Indian steel market even more as they can hike the steel prices as per the global trade price. EU, West Asia and North America consume 10% of Indian export which is expected to double in the coming weeks. As per the latest news, hot-rolled coil (HRC) and TMT bars prices have increased by up to Rs 5,000 per ton by Indian steel makers resulting in the price surge of a ton of HRC around Rs 66,000 and TMT bars for about Rs 65,000.

Conclusion

The Indian steel market is actually benefiting from the war on both sides. One side is that India is selling more steel to other countries since Russia and Ukraine can’t; the other side is that they profit more with the rising steel prices around the world. When these two are combined, the increased prices in the Indian steel market are likely to continue even after the war, impacting Indian manufacturing and infrastructure companies. OfBusiness is one such place where one can get steel at the best prices.