Impact of RINL Production Cuts on Steel Rebar Prices in the Construction Sector
Mumbai: Steel rebar prices have surged in recent months, affecting the construction, real estate, and infrastructure sectors. The rise is partly due to a supply shortage caused by production cuts at Rashtriya Ispat Nigam Ltd (RINL).
Steel Rebar PricesConstruction SectorRinlProduction CutsReal EstateReal Estate MumbaiOct 24, 2024
The price hikes are partly attributed to a supply shortage caused by production cuts at Rashtriya Ispat Nigam Ltd (RINL), a major manufacturer of long steel products, which are used to make rebars. According to a report from BNP Paribas dated 7 October, rebar prices have risen by ₹2,400 per tonne over two consecutive weeks in late September and early October, representing a price increase of about 4-5%. Major steel companies like JSW Steel Ltd and ESL Steel Ltd have hiked rebar prices by about ₹1,000 per tonne, while Jindal Steel and Power Ltd (JSPL) has made a ₹2,000 per tonne upward revision during this period.
Construction activity in India typically peaks in the latter half of the financial year, following the monsoon season, which is expected to drive further demand and price increases. Priyankar Biswas, India analyst for industrials, logistics, and metals at BNP Paribas, said, “We expect a sharp rise in rebar prices due to the RINL production cuts. RINL is a significant player in terms of long products capacity, and their production cuts are causing a 4.5-5 million-tonne annual shortage.”
Earlier this year, in April-May, rebar prices also increased when workers at the Gangavaram port in Andhra Pradesh went on strike, affecting RINL’s production. Steel constitutes about 20% of the input cost for construction firms, according to Kushagr Ansal, director of Ansal Housing. Ansal stated, “Steel prices have seen a moderate increase in recent weeks, though the impact on our margins is currently manageable. We are focusing on optimizing resources to absorb the impact. If prices continue to rise, we may need to reassess our pricing strategy for future projects.”
RINL, which operates the Visakhapatnam steel plant in Andhra Pradesh, has been facing financial difficulties and has missed debt repayments 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 at partial capacity, creating a supply shortage in the market.
Adding to the challenges, the National Highways Authority of India (NHAI) has barred several secondary steelmakers from supplying rebars due to quality issues, according to analysts at BigMint, a market intelligence firm. This has further increased the prices of rebars sold by primary manufacturers like RINL.
Primary steelmakers, such as Tata Steel Ltd, JSW Steel, JSPL, and RINL, use large blast furnaces to smelt iron ore into steel. These primary products are generally of higher quality and are more expensive compared to those produced by secondary steelmakers, who melt steel scraps and iron in smaller electric arc furnaces.
Pradeep Aggarwal, chair of real estate firm Signature Global (India) Ltd, said that the steel price hikes are a minor concern. The company is taking a proactive, long-term planning approach to ensure that it is prepared to handle industry fluctuations. “We remain confident that these price adjustments are temporary, and our thorough planning ensures resilience in navigating industry fluctuations,” he said.
Long steel refers to steel shaped into rods, bars, and wires, while flat steel is manufactured into slabs that are then made into sheets and coils.
Frequently Asked Questions
Why are steel rebar prices increasing?
Steel rebar prices are increasing due to a supply shortage caused by production cuts at Rashtriya Ispat Nigam Ltd (RINL) and the barring of several secondary steelmakers by the National Highways Authority of India (NHAI) due to quality issues.
How do rising steel prices affect the construction industry?
Rising steel prices affect the construction industry by increasing input costs, which can impact profit margins. Companies are focusing on optimizing resources and may reassess their pricing strategies to manage these costs.
What is the annual production capacity of RINL?
RINL has an annual production capacity of 7.3 million tonnes, making it one of the largest manufacturers of long steel products in India.
What is the difference between primary and secondary steelmakers?
Primary steelmakers use large blast furnaces to smelt iron ore into steel, producing high-quality products. Secondary steelmakers melt steel scraps and iron in smaller electric arc furnaces, producing lower-quality products that are generally less expensive.
How are construction companies responding to the price hikes?
Construction companies are taking a proactive approach by optimizing resources and planning long-term to manage the impact of rising steel prices. Some are reassessing their pricing strategies to maintain profit margins.
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