Steel prices, having risen several times in the past year, are expected to come down from April 1. Prices are likely to be corrected by Rs 500-700 per tonne for hot rolled products.

The downward revision in prices has been prompted by a backlog in the Chinese market, which has emerged as the most important export destination for steel produced in India. The glut has resulted in prices of HR coils coming down to $340 from around $370.

Sources pointed out that a temporary glut in the Chinese market implies more material for the domestic market and a resultant downward pressure on steel prices here.

Moreover, steel is also being imported from Commonwealth of Independent States countries at a reduced rate, said Vinod Garg, director-in-charge, Ispat Industries.

"If we do not opt for a price cut now, a demand for the imports would be created," explained Garg.

K S Subramaniam, head (exports), Essar Steel, also said a price correction would take place next month. The industry expects other steel companies to follow suit.

But, the industry feels the downward revision will be arrested and prices stabilised once the backlog in China is cleared.

The price cut is expected to be more in the commercial grades of HR products. Since the beginning of this month, there has been a sharp increase across almost all flat steel products. Prices of hot rolled coils appreciated by Rs 800-1,200 per tonne, cold rolled products by around Rs 1,000 per tonne and galvanised products by Rs 1,200-1,500 per tonne.

Industry sources said though demand still exists in China, Indian steel majors are playing a wait-and-watch game as the country will impose new quantitative restrictions soon. 

In the European Union, however, prices have risen from $300 in December to $325 now. However, it is still lower than the prices prevailing in China.