Steel in India
Steel Prices and Global Cycles
Steel prices rise and fall with global demand, especially China, so Indian mills are exposed to world markets.
Steel is a commodity, and its price is set globally as much as locally.
The China factor
China makes about half the world’s steel. When Chinese demand drops, surplus steel flows to other countries and pushes prices down.
The spread
A mill’s profit is the gap between steel prices and the cost of ore, coal and power.
Cycles
Prices climb during building booms and fall in slowdowns, so steel company profits swing widely.
Import parity
Indian prices tend to follow import prices, because buyers can switch to imports when domestic steel is too dear.
When Chinese exports jump, Indian mills complain of cheap imports eating into their sales.
Profits are cyclical; look across cycles.
- Steel prices are global.
- China's demand shapes prices.
- Profit depends on the spread.
- Profits are cyclical.
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