Steel prices may not come down

Steel prices are not likely to fall in the near future, as import rates for raw material are likely to rise

The Steel Authority of India (SAIL) has announced a price cut in long products. Are steel prices likely to fall in the coming weeks? SAIL’s price cuts are no indication of an overall fall in steel prices, as the cost of future raw material imports is likely to go up.

SAIL had announced a price cut of Rs2,000 per tonne for its long products effective from 1 May 2010. However, this is not an indication of any future fall in steel prices. Taking the current raw material import rates into account— which have risen—steel prices are not likely to soften.

The import price for steel products in stock is around $650 (or Rs32,000) per tonne. Reportedly, this inventory at the import price of $650 is already out of stock. According to research reports, the current market prices for flat products are around Rs36,000 per tonne.

While the stock at the import rate of $650 per tonne has already run out, the current import rates for these products have increased. Import prices are hovering around a minimum possible price of $720 per tonne for most types of steel products—other than ss400 grade coils between 4mm to 12mm thickness. Even the ss400 coils are trading at a minimum import price of $690.

Ergo, steel prices are not likely to fall further as import prices for raw material are on a rise. Any change in the current steel prices will not match the raw material equilibrium at current import rates.

Going forward, raw material imports after May are likely to fall. This might again lead to panic buying, similar to the activity witnessed in March.

An industry source said, “International prices in flat products are not softening, but remain steady in India, as there is an overhang of imported inventory at low dollar prices held by small traders, which they are clearing in a panic. Raw material inventories are already subsiding.”


UN report pegs GDP growth at 8.3% in FY11

The growth outlook is higher than the RBI’s projection of 8% but at the lower end of the finance ministry's forecast of 8.25%-8.75%

The economy is likely to grow by 8.3% in the current fiscal, as against an estimated 7.2% in 2009-10, riding on revival in industrial growth and private consumption, says a report by a UN body, reports PTI.

The report titled ‘The economic and social survey of Asia and the Pacific 2010’ and released by the UN Economic and Social Commission for Asia and the Pacific (Escap) today, said that food inflation, high deficit and large portfolio capital inflows are matters of concern, but still it suggested governments in the Asia-Pacific region to hike social spending to turn the fledgling rebound into sustainable recovery.

“With a revival in investment and private consumption, growth in exports and a strong expansion in industrial production in the recent months, GDP growth is projected to accelerate to 8.3% in 2010,” the report said.

The growth outlook is higher than the RBI’s projection of 8% but at the lower end of the finance ministry's forecast of 8.25%-8.75%.

The Escap report said that in the Asia-Pacific region, developing economies would grow by 7% in 2010-11, led by China and India growing at 9.5% and 8.3%, respectively.

“Governments must embrace this opportunity to secure the gains of the economic rebound by investing in social programmes that directly benefit those hit hardest by (the) still-lingering global crisis,” the report said.

While saying that surging food prices is a cause of concern for India, the report said retail price inflation will fall to 7.5% in 2010 from 12% last year. Consumer prices in India, particularly of food, have "remained stubbornly high", it noted. The consumer price index (for industrial workers) rose to about 9% in 2008 and further climbed to 12% in 2009, it said. "A faster increase in food prices has become a cause of concern," the agency said in the report.

The report expressed concern over high deficits in some South Asian countries where governments used expansionary policies to counter the impact of the global slowdown. "It is important that governments in the sub-region prepare a clear roadmap for fiscal consolidation to be implemented at the earliest to contain growing public debt,” it said.

The survey added, "Yet another challenge is to manage portfolio capital inflows, mainly by FIIs that are leading to build-up of bubbles in capital markets and putting upward pressure on the exchange rates.”

It took note of the BSE index appreciating by over 100% between during March-December 2009 as FII inflows returned to the capital markets and the rupee rallying by around 6% in 2009.


PE transactions in India rise three-fold to $840 million in April

However, the total value of PE deals reported in April was less than the quantum of investment made by these firms in March

India emerged as one of private equity investors' favourite investment destinations in April, with the volume of transactions rising three-fold to $840 million in comparison to the same month last year, according to a study.

According to the monthly report of VCCEdge, the financial platform of, private equity deals in India amounted to $840 million in April 2010, against $285 million in the corresponding period of the previous year, reports PTI.

An upturn was also witnessed in terms of the number of deals recorded during the said period. In April this year, 35 PE transactions were reported, against 22 deals registered in the same period in 2009, the study added.

However, the total value of PE deals reported in April was less than the quantum of investment made by these firms in March. The study said, "On a month-on-month basis, deals value in April 2010 was lower than that in March 2010. The deal activity began with a slow momentum in February 2010 and accelerated in March 2010. However, this pace could not be maintained and deal activity recorded a dip at $840 million in April 2010."

India Inc recorded deals worth $455 million, $501 million and $972 million in January, February and March respectively.

PE transactions under $50 million accounted for 88% of the total deal volume in April this year, while smaller deals ($50 million and below) accounted for 50% of overall capital invested in the last month.

The largest PE deal in April was a $200-million investment in GMR Energy by Temasek Holdings, the private investment company owned by the government of Singapore.

The Temasek-GMR Energy PE deal was followed by the investment made by Bain Capital Advisors India and TPG Capital in Lilliput Kidswear and Actis LLP's investment in TRIL Roads.

A sector-wise analysis showed that utilities, consumer discretionary (luxury goods) and industrials were the most targeted sectors for investment, with deals worth $201 million, $186 million and $160 million respectively in April, 2010.

In terms of deal volumes, the most active sectors were healthcare, finance and luxury goods.


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