India’s domestic Hot Rolled Coil (HRC) prices have fallen further this week on sluggish demand and limited trade activities happening in local market. Meanwhile, government initiatives to scrutinize the steep price hike along with a fall in iron ore prices has led to slump in trade prices.
SteelMint’s benchmark for 2.5mm thickness HRC stands at INR 54,000-55,000 /t (exy-Mumbai), down by INR 750/t as compared to last week.
“Domestic HRC prices continue to remain under pressure due to slow demand in the market. Dealers with immediate requirement are planning to procure material however they are reluctant to purchase at higher prices”, shared a major HRC distributor in Mumbai region
Steel prices in India may come under pressure as:
1. Indian government mulls corrective steps:
- Steel companies face CCI scrutiny for alleged price cartelisation:
India’s anti-trust regulator, Competition Commission of India (CCI) is investigating if steelmakers colluded to hike rates, which have shot up by more than 45% since Jun’20. Steel consumers have been crying hoarse on the increase in the rates. Union Road Transport Minister Nitin Gadkari in January had alleged that steel companies were indulging in cartelisation. - Incentive to successful bidders for early commencement of production from the auctioned mines:
In order to boost mineral production in the country, the Indian Government is moving ahead with an amendment of the Mineral (Auction) Rules, 2015 by offering financial incentives to successful bidders of auctioned mines to start production early. The incentive on payment of amount quoted under rule 8 of the Mineral (Auction) Rules shall be applicable on “the quantity of mineral produced and dispatched between actual date and the scheduled date of commencement of production”.
2.Iron Ore prices plunge:
- SteelMint’s weekly iron ore index down by INR 400/t ($6):
SteelMint’s index for Odisha iron ore fines (Fe 62%) has come down sharply by INR 400/t to INR 5,500/t (ex-mines, including Royalty, DMF & NMET). Prices have decreased owing to the improved iron ore supplies along with a decline in finished and semi-finished steel prices. - NMDC announced price revision:
India’s state-owned iron ore miner – National Mineral Development Corporation (NMDC) has announced price cuts in iron ore for Feb’21. Prices have decreased by up to 12% from its Chhattisgarh based mines This is the first time in the last nine months that company has decreased iron ore prices. - Global iron ore prices plunged by $16/t in Jan’21:
Spot iron ore Fe 62% fines price declined by $16 on monthly basis to $156/t CFR China, amid sluggish demand ahead of Chinese New Year holidays.
3.Sluggish demand from end user industry:
- Federation of Automobile Dealers Associations (FADA) reported a de-growth in auto sales:
Automobile dealers’ body FADA, in Jan’21 witnessed a y-o-y decline of 9.66% in overall sales across categories. On a y-o-y basis, two-wheeler retail sales declined 8.78%, passenger vehicle retail sales declined by 4.46%, commercial vehicle sales slipped 24.99% and three-wheeler sales fell by 51.31%. Commenting on the sales data, FADA President Vinkesh Gulati said, “Auto industry clearly misjudged the demand which returned post lockdown.” - Steel Pipes and Tubes industry witnessed a sluggish sale:
India’s largest structural steel tube manufacturer – APL Apollo Tubes Limited, reported sales volume at 4,86,000 t in Q3 FY’21, up by a mere 1% y-o-y. Similarly, Jindal SAW Ltd, a leading global manufacturer and supplier of Iron & steel pipe products and pipe accessories, reported sales volumes at 2,77,700 t pipes in Q3 FY’21, down 22% y-o-y. India’s largest GI pipe manufacturers-Surya Roshni Ltd, reported a drop in EBITDA to Rs. 175 crores during 9M FY’21 as compared to Rs. 190 crores in 9M FY’20 - Real Estate market remained sluggish in 2020:
Prop Tiger reported a 47% decline in housing sales across eight top cities to 1,82,639 units in 2020 from 3,47,586 in 2019. Residential real estate in India continues to be an end-user driven market which requires substantial usage of steel, initiatives taken by state governments like reduction of stamp duty in Maharashtra and reduction of circle rates by 20% in Delhi is indicating green shoots of recovery, however the overall picture still remains bleak despite housing loan being available at extremely competitive rates.
Outlook: Short-term reduction in steel prices is expected to be counterbalanced
Steel prices in India may seem to come under pressure, however, domestic steel demand may remain favorable in the coming months on the back of several positive announcements made in the Budget and this in turn is likely to keep domestic steel prices buoyant unless the international prices correct significantly from the current levels.
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