5 Major Factors that are Working Wonders for the Steel Industry

History has never given steel the “Midas touch” that it gave gold. In spite of this, steel has managed to become an imperative part of our lives and is making our buildings and pipe networks stranger and steadier. This year had a late start for the steel industry but finally, the sun of steel is shining bright now. Well, the market has been volatile since the start of the year. But over the last two months, a sector that has been doing really well is that of steel. Wondering why only steel? In this blog, Sigma Steel Pipes is here with five fabulous answers to your question. So, hang tight and read till the end.

1. The Stance of PRC on Steel Production

The People’s Republic of China or PRC has finally cleared the haze around its ambiguous inflow and outflow of steel. Initially, this haze was accredited for two major reasons. Firstly, people were barely stepping out of their homes on the pretext of the lackadaisical mental health hangover that COVID-19 had given the world. Secondly, the property market wasn’t doing well. But now, with normalcy kicking in, the steel industry is good to go and enter the suburbs of the PRC. Subsequently, the price per tonne of steel has risen from $500 to around $620-630 per tonne. These are good numbers, to begin with.

2. Watch out for the Domestic Market.

Indian steel prices were at a premium compared to their Chinese counterparts, meaning importing steel from China was cheaper.

That has quickly turned around. From a premium of Rs 8,000, the Indian steel makers went ahead and cut prices, while the Chinese players increased them. Suddenly, the entire ratio has flipped and now you have the imported Chinese steel coming at a premium in comparison to the domestic one. However, with Sigma Steel Pipes in the picture, a considerable number of industries are getting steel at decent quotations.

3. The Dramatic Rise of Iron Ore Prices

Iron ore prices have been on a tear, rising as much as 50 percent from the lows seen recently. Iron ore prices moving up give a bit of a base to steel companies as well. This is an advantage to India because most ferrous companies in India get the majority of their Iron ore from domestic sources. Domestic iron ore is at a discount to the imported one currently. 

Let’s not forget that steel is the base of the iron ore industry. So, iron ore prices move up, then steel prices get a base, and in that context, India is relatively better placed.

4. The Thirst, the Demand.

Well, let’s not sideline the fact that the demand has been good. That price increase taken at the start of January has been lapped up by consumers, so that is good news. Additionally, restocking is taking place after a pause when customers stopped buying steel in anticipation of prices falling. Also in the coming quarter, the export volumes will pick up. It is to be kept in mind that steel and metals are not really about valuations. It’s more about momentum investing and that is where we have seen the stocks run up. But more or less on a price-to-book value basis, it is pretty much in line with what the expert traders have been trading at.

5. The Steel PLI

In October 2021, the government approved the PLI Scheme for Specialty Steel Sector for a 5-year period. Today, specialty steel accounts for about 18% of the steel produced in India and can meet a whopping 85% of domestic demand. The balance is met through imports. This Scheme aims to promote the manufacturing of specialty steel in India through capital investment, employment generation, and technology upgradation, thus, reducing dependence on imports in meeting the domestic demand. 

Thanks to the aforementioned reasons, the Indian steel industry is reaping profits. For more engaging content on steel and steel pipes, stay in touch with the best stainless steel pipes manufacturer at https://sigmapipes.com/.