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Steel is a significant constituent raw material used in the construction industry. Any rise or fall in the rates of steel in india would directly impact the construction cost. Steel rates have escalated globally in recent years. There has been a momentous hike in steel prices in India in the last two years. These prices have almost doubled in this short period. An increase in the price of raw materials and newer policies adopted by China to grow its domestic infrastructure are the leading cause of this rise. Although the price rise has been profitable for large steel manufacturers such as TATA Steel, Jindal, SAIL, etc, it has negatively impacted small enterprises.
Steel Price Hike In India
China is the largest manufacturer of steel in the world. It produces around 55% of the world’s steel. Steel prices have increased in India since July 2020, when China took vital decisions regarding steel supply and export. Here we have compared the variation in steel prices from June 2020 to May 2023.
Why India’s Steel Rates are Rising?
The enormous rise in steel prices in India has been multifactorial. Some of the main reasons for this hike are listed as follows.
1- Increased Demand
As the lockdown ceased after covid-19 and economic activities resumed, there was a considerable increase in the demand for the core materials like iron, steel, bricks, concrete etc. However, steel production did not accelerate at the same rate as the demand. This led to a remarkable rise in the steel price.
2- Shortage of Raw Materials
Iron ore is the main constituent of steel. The primary suppliers of iron ore namely Australia, Brazil and Canada limit the export of the material after the pandemic. Therefore, increased demand and low supply have led to a rise in the iron ore price. A shortage of other raw materials is another reason for the steel price increase in India.
3- Role of China On Steel Price Hike
Some primary decisions of China in steel manufacturing and supply played a vital role in the price hike of steel. These are as follows.
- Limiting Steel Manufacturing: China limited its steel production as a measure to reduce pollution. This helped reduce carbon emissions in China’s most polluted city, Tangshan.
- China limits export: As a result of decreasing steel production and to meet its domestic steel needs, China limited the export of steel to other countries. This in turn disturbed the economy and caused steel price hikes.
- Removing Relaxation On VAT: This was another significant decision taken by China to reduce the export of steel. China suspended the rebate relaxation on taxes which led to a further increase in steel prices.
- Importing steel from India: India is the second largest producer of steel after China. Furthermore, to fulfill their domestic needs, China imported steel from India.
4- Increased Export Of Steel From India
When China suspended the steel export to other countries, it lead to an increased demand for steel export from India and contributed to the steel price hikes in India.
5- Depreciation of Indian Currency
The constant fall in the value of the Indian currency is an important factor in the steel price hikes in India.
Strategies To Mitigate The Steel Rates Hike
The government has taken certain measures to mitigate the price hike such as by decreasing the export of steel from India and reducing the GST on the metal. The prices have come down to some extent in 2023. However, any stability or further fall in the prices is still contentious.
Building steel inventories and stockpiling the metal can help various industries in escaping the unusual hike.
Tips to Save Money while Purchasing Steel
In order to save money during times of high steel market prices, contractors can employ several strategies while purchasing steel. Here are a few tips:
Plan ahead: Anticipate steel needs well in advance and lock in prices before they rise further.
Seek multiple quotes: Compare prices from different suppliers to ensure the best deal. Negotiate with suppliers for competitive rates.
Explore alternative materials: Consider cost-effective alternative materials that meet project requirements without compromising quality.
Optimize design: Collaborate with engineers and architects to optimize designs, reducing steel requirements and cost.
Bulk purchasing: Consolidate steel orders to negotiate better pricing and potentially benefit from bulk purchase discounts.
Collaborate with other contractors: Jointly purchase steel to leverage collective buying power and negotiate favorable rates.
Look for cost-saving measures: Explore value engineering options like prefabricated components or efficient construction methods.
Consider recycled or salvaged steel: Evaluate the feasibility of using recycled or salvaged steel, which can be cost-effective.
Monitor market trends: Stay informed about steel market trends, including price fluctuations and supply chain dynamics.
In conclusion, industry professionals and consumers must understand the reasons behind the rising steel rates in India. Factors such as increased global demand, disruptions in the supply chain, and rising production costs contribute to these price hikes. By staying informed and proactive, stakeholders can effectively navigate these challenges.
Exploring alternative materials, optimizing design, and seeking cost-saving measures can help mitigate the impact of the rising steel rates. As the steel industry continues to evolve, it is important to stay updated on market trends and explore sustainable solutions. Together, we can adapt to the changing landscape and build a resilient future amidst fluctuating steel rates.