Shortage of Long Steel Products for Construction

Housing and construction projects outside urban markets are staring at a slowdown for a few months with dealers and buyers reporting a shortage of long steel products, such as rods, bars and wires. Construction steel, mostly p

BY Realty Plus
Published - Saturday, 16 Jan, 2021

Shortage of Long Steel Products for Construction

Housing and construction projects outside urban markets are staring at a slowdown for a few months with dealers and buyers reporting a shortage of long steel products, such as rods, bars and wires. Construction steel, mostly produced by small, secondary steel mills scattered across the southern and eastern regions, has been in short supply as many micro, small and medium enterprises (MSMEs) struggle to emerge from the effects of the pandemic on labour and capital as well as sky-high iron-ore prices. The key reason for the shortage appears to be linked to a scarcity of iron ore in the local market. NMDC Ltd, the state-run primary ore miner that steel mills depend on, raised the price of iron ore lumps from Rs 1,960 a tonne in June to Rs 4,610 in December, a 135% increase over six months. Meanwhile, NMDC’s average monthly iron ore production declined 27% from a year earlier during April-November to 13.81 tonnes. About 1.6 tonnes of iron ore are required to produce a tonne of steel. Iron ore prices are moving in tandem with the global trend, which is rising to meet China’s stimulus-driven appetite for steel. This has prompted miners across the world, including in India, to increase their steel exports. In India, construction steel producers, who are mostly medium-sized enterprises making unbranded TMT (thermo-mechanical treatment) bars and rebars at plants of under 2 million tonnes per annum capacity, are unable to keep up with the rising input costs as they do not have the pricing power to pass on the increase in prices to their customers. Analysts say the shortage is being felt acutely in non-urban markets, where large integrated steel mills do not have a marketing presence, and where building projects may be delayed.