TV Narendran, CEO of India’s Tata Steel, said that steel prices in the next few years may be much higher than the long-term prices in the past.
Narendran gave an example on the “CNBC” program that in the past seven or eight years, the average price of hot rolled coils was about 400 or 450 US dollars per ton. He predicts that the long-term average price in the next few years may exceed $600.
Under the recent surge in hot-rolled coils, Narendran said that the latest quotation last Friday was US$750 in China and US$850 in Southeast Asia.
He believes that prices will fluctuate within a certain range in the next few years, but the fluctuating prices will be higher than seen in the past.
Narendran explained that the steel market is undergoing some changes, including rising costs and the changing role of China in the market. In the past decade, steel was mainly exported from China, but now the stability of world steel trade is much higher.
Narendran said that during the peak period, China exported more steel than India produced. Since then, China’s steel exports have halved to about 60 million tons per year, and as China pursues its net zero carbon emission target, exports may fall further.
At the same time, with the Western world investing in infrastructure and increasing demand for steel, US President Biden signed an infrastructure bill of more than $1 trillion this month.
He said that the growth of steel consumption this year comes from countries outside of China. This is the first time in many years that steel demand has not been promoted by China.
On the supply side, coal and iron ore are both raw materials for steel production. Due to rising coal prices, input costs are at historically high levels. But Narendran said that iron ore prices have weakened, and in the long run, the transaction price should fall to between US$100 and US$120 per ton.
Narendran said that increasing carbon costs in Europe may also push up steel prices. It is also expected that “the price of steel in the next 10 years will be much higher than the level of the past 10 years.”