Increase in demand in iron-steel market due to increased spending by the government in the infrastructure sector

- Bhoo Bazar : Dilip Shah

- Increase in iron ore and coal prices increases cost of steel production: Exports of iron ore increased due to relaxation in export duty.

Iron and Steel – The iron and steel market and industry, both domestically and abroad, have recently seen a rapid reversal of tides. As the rains have departed from the country, the second round of construction activity has begun this year and due to this, demand and activity in the iron and steel market and industry have resumed. Domestic steel producers hiked prices in October ahead of Diwali. On this side, in the context of the elections in various states and the upcoming Lok Sabha elections, there have been indications of increased spending by the governments in the infrastructure sector. Due to this, there was an increase in the demand towards the infrastructure sector in the steel and iron market. As the prices of raw materials used to make steel also went up, there were indications that the production cost of steel had also increased, and due to this, the steel manufacturers had increased their prices. Meanwhile, according to sources in the steel market, every year usually the construction activity in the country slows down during the rainy season, but this year, as the rains were slow and irregular, construction activity and activity in many cities and states were generally maintained even during the monsoon. Coal and iron ore are important factors in the production of steel and the market prices in China went up and due to this the production of steel became more expensive. Since the end of July, the price of steel has increased by about Rs.2000 per tonne. Long and flat steel prices were seen moving higher after being sluggish during the months of June and July. Long steel is used mainly in the construction sector and the price of such steel has seen a significant increase, while the price of flat steel has seen a slower growth.

Meanwhile, China's role in the global iron ore and steel market is considered key. When there is an economic downturn in China, the pressure on the prices of these commodities increases. When the government in China releases various stimulus packages to support the economy, the prices of these commodities rise again. In China, the property sector has recently seen a softening. But recently there were signs that the Chinese government has started serious efforts to bring out the recession in the sector. Following this news, a positive effect was seen on the prices of iron ore and steel in the world market. The price of iron ore in China increased to 136 to 137 dollars per tonne recently. In the Singapore market, the price increased to 133 to 134 dollars. There has been a labor unrest among railway employees handling iron ore in Australia and fears of an impact on iron ore supply. Coal prices have also increased in the world market. The prices of hot-hold coil and wire rod have increased in the world market. There were indications of a recent increase in iron ore production at the government-owned NMDC in India. Such production at the National Mineral Development Corporation had recently reached a record high. Iron ore exports from India doubled in the last quarter of fiscal year 2022-23. During this period, such export increased to 11 lakh 90 thousand tons. Earlier this quarter, the government had given relaxation in export duty and due to this, the goods went overseas more during this period. However, in the full financial year of 2022-23, such exports decreased by around 20 percent. About 9 to 10 percent of the total iron ore production in the world is produced in India. Australia is the largest producer of iron ore, followed by Brazil and China. Import of iron ore in China increased by about 10 percent in the above quarter. However, iron ore imports have slowed down in the post-mentioned period as the government recently imposed various restrictions to reduce pollution in steel production in China.