India’s domestic Hot Rolled Coil (HRC) prices continued to fall further this week on stagnant demand and rising inventories with traders.SteelMint’s benchmark prices for 2.5mm thickness HRC stands at INR 53,500-54,000/t (exy-Mumbai),down by INR 750/t w-o-w.
Key factors leading to price correction:
1.Rising inventories with traders
Traders are reluctant to procure material from mills at higher prices as they have sufficient inventories. Major HRC dealers and distributors are less likely to procure material from the mills at higher prices due to lower profit margins. Meanwhile, auto vendors and OEMs are also showing resistance in procuring material from mills at higher prices.
2.Moderate demand from end user industry
Auto and pipe makers also reported sluggish growth in sales on moderate demand. Automobile dealers’ body FADA announced in Jan’21, that the industry had witnessed a y-o-y decline of 9.66% in overall sales across categories
3.Disparity between trade price and mill price-
The gap between the trade price and mill prices has widened due to limited sales in the domestic market. Currently, major steel mills are offering HRC at INR 55,000/t (exy-Mumbai) and the market price is hovering at INR 53,500-54,000/t (exy-Mumbai). Prices do not include GST extra @18%.
On the other hand, mills are yet to have a re-look at their pricing strategy.They do not see domestic steel prices going up, but there may not be a big correction downwards.
The reasons behind it are mentioned below:
1.Rumour on Chinese export rebate cut-
There is a buzz in the market that the Chinese Government may announce a possible adjustment in export rebates to 8-9% which is currently 13%. Before the Lunar New Year holidays, Chinese traders/mills are making offers based on the condition that buyers will have to absorb the rebate differential (which is about $30-35/t), in case it is announced.
2.Landed cost of imports not workable
SteelMint has learned that offers from Chinese (BIS certified) mills are at $690-700/t CFR India for April shipment. This translates to Rs 55,000-56,000/t as landed cost of imports at Indian ports. Stockists are therefore hesitant to import due to the long delivery period in such a volatile market.
HRC Plate market also remained sluggish-SteelMint has observed that plate prices remained sluggish on limited buying interest. “Demand is average and has not yet picked up. Though some project visibilities are there but buying has not yet started” shared a major plate steel producer
Near term outlook:
Indian steel mills may increase export allocations for March or April’21 shipments to offset bearish sentiments in the domestic market. Indian finished flat exports had stood at around 0.61 mn t in Mar’20 and around 0.56 mn t in Feb’20. A similar trend is expected for Mar’21. However, the picture will be clearer after the resumption of Chinese mills post-Lunar New Year holidays. SteelMint also expects that owing to sluggish demand and lower trades, mills may compensate by offering rebates by month-end.
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