Mumbai: Domestic steel majors are expected to hike prices further in October on the back of a likely upswing in industrial and infrastructure construction activities, according to a CMIE report.

"We expect steel companies to hike prices in October- November once industrial and infrastructure construction activity gathers pace," the Centre for Monitoring Indian Economy (CMIE) said in its monthly review.

In FY'12, the agency expects finished steel prices to average 7 percent higher than in 2010-11. It also noted that steel prices have already risen nearly 15 percent in the first quarter of the fiscal.

However, it has sharply scaled down its growth forecast for finished steel production for the fiscal from 12 percent to 9.5 per cent.

"The downward revision is due to the lower-than-expected growth in demand for steel in the first quarter and a shortfall of iron ore likely to be faced by the steel units in Karnataka," it said.

Earlier, Tata Steel Managing Director H M Nerurkar had said domestic steel demand was likely to grow at about 9 percent during the current fiscal. The steel giant expects steel prices to remain stable, with prices going up or moving down by Rs 1,000 a tonne for some time.

"India will remain a net importer of steel despite concerns on growth in other markets," he had said recently.

Iron ore prices are ruling high due to the ban imposed by the Supreme Court on mining in Bellary and the huge demand for the commodity from China, the report said.

Most companies have signed coking coal contracts for the September quarter at USD 315 a tonne, which is 40 percent higher than the year-ago level.

It may be recalled that on July 29, the Supreme Court had suspended iron ore mining in Karnataka's Bellary district.

"If the ban continues for long, the plants located in Karnataka will have to cut down production," the CMIE said.

Finished steel consumption grew by a paltry 1.9 percent during Q1. "Although production grew by 12.5 percent in June, a 7.8 percent growth for the June, 2011, quarter was below expectations," the report said.

Cement prices may recover post-monsoon

Cement prices are expected to recover after the monsoon ends due to a likely pick-up in construction activity, the Centre for Monitoring Indian Economy has said.

"We expect cement prices to recover after the rains. With construction activity expected to pick up post-monsoon, demand is likely to rise," the Centre for Monitoring Indian Economy (CMIE) said in its monthly review here.

Cement prices have declined amid sluggish demand from May onward. Prices in the Mumbai, Delhi and Kolkata markets are down from their peak levels of March-April, 2011, it said.

Prices in the Mumbai market were down to Rs 276 per 50 kg bag in July, 2011, from Rs 283 per 50 kg bag in April. In the Delhi market, cement prices declined to Rs 256 per 50 kg bag from the peak level of Rs 261 per 50 kg bag in April.

In a similar fashion, prices in the Kolkata market came down to Rs 247 per 50 kg bag during the month from the peak level of Rs 298 per 50 kg in March.

However, prices in the southern region bucked the downward trend and remained stable. Prices in the Chennai and Hyderabad market remained almost stable at their peak of April, 2011, in the month of July, 2011.

Meanwhile, cement dispatches grew by 10.1 percent in July, 2011.

All-India cement dispatches (including ACC and Ambuja) reported strong year-on-year growth of 10.1 percent in July, 2011. Cement demand improved y-o-y in all regions except for the southern region in July, 2011.

The industry reported double-digit volume growth for the first time in six months in July, 2011, primarily due to the lower base (in July, 2010, cement dispatches had declined by 3.9 percent due to heavy rains) and a modest improvement in cement demand.

(Agencies)