Steel bar prices are high and may rise, worrying the real estate and infrastructure sectors

The price increases were partly due to a supply shortage amid a drop in production at state-run Rashtriya Ispat Nigam Ltd (RINL), a major maker of long steel, which is used to make steel bars armor

Average rebar prices experienced a cumulative increase ₹2,400 per tonne for two consecutive weeks in late September and early October, according to a BNP Paribas report dated 7 October. This results in a price increase of 4-5%. JSW Steel Ltd and ESL Steel Ltd increased rebar prices by approx ₹1,000 per tonne while Jindal Steel and Power Ltd (JSPL) made one ₹2,000 per tonne upward revision during this period.

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Prices are expected to rise further in the coming weeks as demand increases. In India, construction activity peaks in the second half of a financial year, after the monsoon season.

“We expect a sharp rise in rebar prices due to RINL’s production cuts. RINL is a big player in terms of long product capacity and its production cuts are causing 4.5-5 million tonnes of shortfall annually,” said Priyankar Biswas, India analyst, industrials, logistics and metals, BNP Paribas.

“In April-May too, rebar prices shot up when workers at the Gangavaram port (in Andhra Pradesh) went on strike, curtailing RINL’s output,” he said.

Steel accounts for about 20% of the input cost of construction companies, according to Kushagr Ansal, director of Ansal Housing.

“Steel prices have seen a moderate increase in recent weeks, although the impact on our margins is currently manageable,” he said. “Currently, we are focused on optimizing resources to absorb the impact. If prices continue to rise, we may need to reassess our pricing strategy for future projects.”

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RINL, which operates the Visakhapatnam steel plant in Andhra Pradesh, is facing cash crunch and has missed debt payments since July. The company has an annual production capacity of 7.3 million tonnes, one of the largest among long steel product manufacturers in India.

However, only one of its three blast furnaces is operational and that too at partial capacity, people in the know said. This is creating a shortage of rebar supply in the market.

Also aggravating the situation is that the State Highways Authority of India has barred several secondary steel makers from supplying rebar due to quality failures, according to analysts at BigMint, a d ‘market intelligence.

This is further increasing the prices of rebars sold by primary manufacturers such as RINL, they said.

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Primary steelmakers are those who melt iron ore into steel in large blast furnaces. Secondary steelmakers melt scrap steel and iron in smaller electric arc furnaces to make steel. Tata Steel Ltd, JSW Steel, JSPL and RINL are some of the major steel manufacturers. The quality of primary steel is usually higher and the products are also more expensive.

Pradeep Aggarwal, chairman of real estate firm Signature Global (India) Ltd, said that steel price hikes are a relatively minor concern and the company is taking a proactive and long-term planning approach to ensure that there there are contingencies to safeguard the margins.

“We are confident these (price) adjustments are temporary and our comprehensive planning ensures resilience to navigate industry fluctuations,” he said.

Long steel refers to steel that is in the form of bars, rods and wires. Flat steel is manufactured in the form of slabs which are then transformed into sheets and coils.