Domestic steel trade prices are expected to remain elevated as major Indian steel mills are planning to increase the prices from April 2021 onwards on account of higher export realisation, strong demand recovery from end-user industry and absence of imports in the foreseeable future. As of week fourteen of CY 2021, SteelMint’s benchmark prices for 2.5mm thickness HRC is in the range of INR 58,000-59,000 (exy – Mumbai) up by around INR 3000/t w-o-w basis.
The northward movement of the steel prices are likely to remain unabated due to the following factors:
a) Competitive overseas market: Indian steelmakers have raised their HRC export offers to around $840-845/t CFR Vietnam. Higher HRC export offers on bullish market trends along with an increased preference of Vietnam re-rollers for Indian origin HRC over China have supported the price hike. SteelMint’s Indian HRC (SAE 1006) export index stands at $827/t Fob East-coast basis, up by $42 w-o-w.
b) Healthy demand from Pipes and Tubes Sector- APL Apollo Tubes Limited (APL Apollo), India’s leading branded structural steel tube company, registered a sales volume of 435,348 ton in Q4 FY ’21, up 9% y-o-y. As the housing sector is expected to be bullish for a couple of months going forward, we expect the demand for structural steel tubes to be healthy which in turn will drive the HRC demand in the domestic market.
c) Strong Demand from Auto Sector- As of Mar ’21, the demand momentum largely sustained across segments, inventory levels were seen below normal for PVs and tractors due to strong demand. India’s largest auto manufacturer, Maruti Suzuki India Limited posted total sales of 167,014 units in Mar ’21, the domestic sales in Mar ’21 have recovered to Mar ’19 levels. Tata Motors Limited Q4 FY ’21 sales stood at 191,720 vehicles, compared to 101,420 units during Q4 FY ’20. Tata Motors Passenger Vehicle business posted its highest-ever sales in 9-years, in Mar ’21 and Q4 FY ’21 echoing positive sentiments.
d) Demand from government projects- The National Highways Authority of India (NHAI) is set to bid out highway projects worth around Rs 50,000 crore in the first quarter starting from April this year. NHAI will start Q1 FY ’22 with around 2,500 km of bids to be awarded.
Near Term Outlook- Firm demand, higher realisations and lower risk of cheap imports from China are likely to accrue benefits for Indian manufacturers and drive the domestic prices in the foreseeable future.
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