Higher export realizations motivated Indian steelmakers to lift HRC and CRC prices in domestic market. Meanwhile, price rallies in the global market have increased the gap between local and export prices. Due to this factor domestic mills are continuously raising steel prices. Last month Indian mills had raised HRC and CRC prices thrice and recently have lifted prices by INR 4500-5500/t ($60-70). After the price announcement, the gap between HRC and CRC widens and are at a record high
The gap between HRC and CRC spreads to a record all-time high-
The gap between HRC and CRC spreads was around INR 15,000/t at the beginning of May’21 after the mill announced a steep hike in prices. However, from Jan.’21 the difference between the two was around INR 11,000/t. The gap is abnormally wide since the normal gap was around INR 4,500-5,000/t. Thus the spread remains wide from Jan-Apr.
Meanwhile SteelMint’s benchmark prices for 2.5mm thickness HRC stands at INR 65,000-66,000/t and CRC at INR 80,500-81,000/t (exy-Mumbai).The prices mentioned are basic and GST extra @18% is applicable.
SteelMint analyses few factors behind the increased gap between HRC and CRC
1. Major steelmakers announced a sharp price hike-
Indian steel mills lifted HRC and CRC prices thrice in last month for April deliveries. In May companies have again lifted prices which are mentioned below:
- Recently JSW Steel increased HRC prices by INR 3,500/t and CRC prices 5,500/t. The effective prices of HRC are around INR 65,000-65,500/t (exy-Mumbai) and CRC at around INR 80,500-81,000/t (exy-Mumbai).
- Also, AM/NS India lifted HRC prices by INR 4000/t and CRC prices by INR 4500/t. Effective prices of HRC is around INR 67,000-67,500/t and CRC at around INR 80,000-80,500/t (exy-Mumbai)
- Other steel mills are will announce price hike shortly
- Prices do not include GST extra @18%
2. Higher export realizations in CRC exports-
Recently two major private steelmakers booked around 30,000 t CRC to Europe at around $1370-1380/t CFR basis for June shipments. During the last week of Apr’21 Indian steel mills have collectively booked around 50,000 t CRC for exports to Europe at $1330- 1350/t CFR for May shipments. Few mills have exhausted their HRC exports quota to Europe thus shifted focus to CRC exports This in turn provides enough headroom to Indian mills to increase prices sharply in the local market.
3. Demand supply mismatch-
Indian steel mills have actively booked HRC and CRC for exports on sharp surge in prices. Indian bulk HRC export shipments increased sharply by 67% to 5,37,445 t in Mar ’21 as against 2,83,507 t in Feb ’21, as per the data maintained by SteelMint. Also before the announcement of lockdown in few states demand for auto and consumer durable remained optimistic. This, in turn, resulted in a tighter supplies among mills for the downstream industry which includes CRC and galvanized products of material in domestic markets. Thus, demand-supply mismatch resulted in the wide gap between HRC and CRC prices
4. Imports are not viable-
CRC imports are not viable at the moment because of higher global prices from major exporting nations. Major Chinese mills were offering CRC export offers at around $930/t Fob China before the announcement of rebate. However fresh offers will be announced post Labour day holidays. Meanwhile, Japanese and South Korean offers for CRC are at premium levels. Thus the absence of imports gives an opportunity to Indian mills to lift prices in local markets
Near term outlook-
Recently, few auto and consumer durable plants have announced the shutdown in their plants as Covid surges in India. Also, traders are mulling over lower trade inquiries on frequent lockdowns. Thus, higher CRC prices in the local market shall be absorbed or not remain uncertain. However, domestic steel mills are cushioning themselves by continuing to explore export options at higher prices.
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