Steel rebar prices increased by Rs5,000 per ton

The prices of steel rebar have gone up by Rs 5000 metric ton effective from July 7, 2021, mainly due to an uptick in international scrap prices.

ittefaq” steel bars announces that it will increase prices of steel rebar including all grades and all sizes Rs. 5,000/Metric Ton effective from July 7, 2021.

Domestic rebar prices remain north-bound, increasing by Rs5,000 per ton on Wednesday, and are currently trading at Rs155.5k per ton to Rs157.5k per ton.

This takes the cumulative price increase during the last 30 days to around Rs13, 000 per ton.

The ongoing price increase is mainly due to an uptick in international scrap prices, currently at US$518 per ton which serves as raw material for rebar.

During the fourth quarter of the financial year 2020-21 (4QFY21), local rebar prices averaged around Rs142k per ton, improving by 3% quarter on quarter (QoQ) against Rs138k per ton in 3QFY21.

Despite higher prices, local rebar producers’ gross margins are expected to narrow by 2-3% in 4QFY21 due to the delayed impact of scrap prices, which gained momentum during December 2020 (assuming a 90-day inventory lag).

Thus, with the impact of higher scrap prices likely to be more visible in 4QFY21, we expect the gross margins of local rebar producers to average around 13% as opposed to 16% during 3QFY21.

Assuming domestic rebar and international scrap prices maintain at their current levels, we estimate gross margins to improve in 1QFY22 to the tune of 3-4%.

We believe that manufacturers may continue to pass on the cost pressures easily given the robust demand outlook on the back of a higher PSDP target of Rs2.1 trillion and a GDP growth target of 4.8%, Sherman Research said in a report.

We maintain an ‘Over-Weight’ stance on the long steel segment, which is currently trading at FY22 PE of 7.1x — a discount of 60% from the historical average, it further adds.