Steel prices to remain highly volatile: Tata Sons

Globally steel prices have corrected 5% in last three-weeks. Commenting on the issue, JJ Irani, Director of Tata Sons said Chinese markets, the world's largest producer of steel, has retracted but has just stopped growing. “The high growth rate in China was unsustainable.”
However, Irani said the Chinese will not cut back on steel consumption. “They will continue to produce between 500-600 million tonnes and will also continue to use that much amount.” 
On pricing front, Irani said, the “joker in the pack” remained raw material prices. “The iron ore tax in Australia may lead to higher costs,” he said. 

The other big problem has been Europe where there are fears of demand coming down for companies like Tata Steel who have a lot of their businesses earmarked to the region. However, Irani does not see any impact on Indian steel industry arising out of the Eurozone crisis. 

Going forward, Irani said steel prices will remain highly volatile.
 

Below is a verbatim transcript of the interview. Also watch the video.
Q: First a word on one market that is keeping every one troubled that is China and how much demand is actually slipping over there in order to press down prices?
A: I think the Chinese market has stopped growing. It’s not that it is retracting, but the type of increases we saw there, 50 million tonnes per year for the last 5-6 years, that sort of growth was unsustainable and may not take place but I don’t see the Chinese market actually using less steel. They will continue to produce between 500 and 600 million tonnes and also continue to use that much amount, they are not importing much and they won’t export much.
Q: Would it be fair to say that steel prices internationally have peaked off for this summer at least?
A: In the Steel prices there is a joker in the pack because it depends very much on the raw material prices. All of us are aware that raw material prices at the beginning of the year were increased without any particular reason. The three main raw material producers saw an opportunity and they increased the prices quite substantially, that resulted in windfall of profits for them and the Australian government has slapped on a windfall tax. That has prompted the rawmaterial producers to say that, 'Now that we are going to be taxed, we might have to charge even higher.'
It seems as a rather ludicrous situation in which you (raw material producers) make huge profits, you are taxed on that and because you are taxed, you say that you will increase your prices even further. So that matter is not yet resolved, but if they do increase the prices again, the raw material producers, then of course the steel makers cost will go up. Our cars, homes, and washing machines, everything that uses steel will cost that much more because the steel makers would have very little option but rather than trying to pass on these increases in costs, as a result of rawmaterial cost increases, to the final consumer. 

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