Indian steelmakers are likely to increase HRC and CRC price in May on the backdrop of higher export realizations in global market. After gaining momentum since last few months Indian HRC and CRC trade prices are recorded an all-time high.
SteelMint’s benchmark prices for 2.5mm thickness HRC stands at INR 65,000-66,000/t and CRC at INR 79,500-80,500/t (exy-Mumbai). The prices mentioned are basic and GST extra @18% is applicable.
*Prices mentioned above are as per SteelMint price methodology
Factors driving Indian steel prices are mentioned below:
1. Higher export realizations motivating mills to raise domestic prices- SteelMint’s Indian HRC (SAE 1006) export index stands at $950/t FoB East-coast basis, up by $14/t w-o-w against $936/t FoB basis. Mills continue to raise HRC offers on higher price realizations and bullish sentiments hovering in the global market. Indian HRC export offers to Vietnam is at $970/t CFR, for Middle East at $980-985/t CFR and for Europe at $1050/t CFR for June shipments. Along with this, last week major Indian steel mills have collectively booked around 50,000 t CRC for Europe at $1,330-1,350/t CFR for May end shipments.
2. Oxygen supply will not affect steel production of major steel mills- Against the present demand from 20 states of 6,785 tonnes/day of LMO, the Government of India (GoI), from April 21, has allocated 6,822 tonnes/day to these states. It was noted that, in the last few days, availability of LMO increased by about 3,300 tonnes/day with contributions from private and public steel plants, industries, oxygen manufacturers and through prohibition of supply of oxygen for non-essential industries. GoI has allocated distribution of LMO from each of the integrated steel plants to various states.
But diversion of LMO is not forcing the steel plants to stop production. And the reason is that more than 30% of the oxygen produced is kept in the liquid form, which can be transported and therefore can be given away as medical oxygen. Therefore, the impact on steel production will be minimal and temporary till the medical oxygen producers are able to adequately ramp up production. The present crisis may continue till next month but start tapering off from mid-May.
3. Increase in iron ore prices on tight availability- As of 24th Apr ’21, SteelMint’s weekly index for Odisha iron ore fines (Fe 62%) has moved up sharply by INR 700/t to INR 7,800/t (ex-mines, including Royalty, DMF & NMET) following hike in offers by the leading merchant miners. Limited availability of high-grade ore has continued to keep prices supported. Sarda mines has raised fines (Fe 63%) offer by INR 200-300/t this week. Towards the end of last week Odisha’s Essel Mining increased its offer by INR 800/t further in lump and INR 700/t for fines. Apart from them, other miners like JSW Steel & Serajuddin mines have also announced a price hike in lumps this week.
Will prices sustain in market when downstream industries are shutting their production?
- At least five major automobile companies – Hero MotoCorp, Honda Motorcycle, Scooters India Ltd, Maruti Suzuki India Ltd, MG Motor and Toyota Kirloskar Motor Ltd have decided to advance their annual maintenance shutdown in all their respective factories to the first half of May.
- Haier India’s plant at Pune has not been operational due to lockdown restrictions imposed by Maharashtra.
- Panasonic India has also paused manufacturing at its plant at Jhajjar, Haryana for a week.
- Traders in various regions are of view that amid lockdowns, inquiries are limited and higher prices are difficult to absorb in the market
Outlook- Acceptance of elevated prices in local market continues to remain a question. However, with the announcement of China’s removal on HRC rebate tax, it gives enough headroom to Indian steel mills to lift the prices further in domestic market. Indian steel prices are still at a discount as compared to imported HRC and the spread may increase further in May ’21.
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