New Delhi: Steel prices are not likely to improve much this year due to surging imports, a report by Citi Research has said.
"With the surge in imports into India, Indian producers have been pricing steel in line/at a discount to import parity prices ... We do not expect steel prices to rise much from current levels," the report said.
The price of hot-rolled coil (HRC), the benchmark flat product, is currently trading in the range of Rs 32,000-33,000 per tonne down from Rs 35,000-36,000/tonne in Apr-May, 2012.
The brokerage firm also does not expect any significant uptick in India's steel demand, which grew by just four percent during the April-December period of the current fiscal.
India's steel consumption grew by 10.6 percent in 2010-11 and 5.5 percent in 2011-12.
"Steel companies are facing an inventory buildup. While producers have announced hikes of around Rs 1,000 per tonne in January, 2013, they are unsure about being able to push through the hike given demand trends," it said.
Pricing upside is capped as imports, particularly from China and free trade association countries, are high, it added.
Citi estimates China's steel demand to reach 742 million tonnes in 2013, with the assumption that flats grow at 2.5 percent and longs increase by five percent.
"We see 40-50 MT of capacity to be under construction in 2013 based on channel checks, and channel checks almost always underestimate instead of overestimating capacity additions," it said.