Indian HRC prices remained largely stable this week due to sluggish demand and inactive trade in the domestic market. Last week, Indian mills sharply raised HRC and CRC prices by around INR 3,000-4,000/tonne for Jun’21 deliveries to reduce the gap between international and domestic prices.
However, higher steel prices didn’t get absorbed in the domestic market due to the following reasons:
1.Wide gap between the trade and mill prices: This week, SteelMint’s benchmark prices for 2.5mm hot-rolled coils (HRC) stand moderate at INR 66,500-67,500/t (exy-Mumbai) against last week. On the other hand, major steelmakers are offering HRC at INR 70,000-70,500/t (exy-Mumbai). The prices mentioned do not include GST @18%. Thus, the gap between offer and actual price is INR 3,500/t which resulted in limited trade.
2.Sluggish demand: Traders based in Mumbai and Faridabad region told SteelMint that sales are very low in the traders’ market. “Delayed purchases by customers due to elevated prices resulted in inactive trade in local markets. Buyers are hesitant to purchase the material at such higher prices”, said a major distributor in Mumbai .Despite the commencement of the unlocking phase in a few states, sales mainly in Maharashtra and Delhi remained low and demand continued to remain bleak. Indian domestic steel consumption was at 7.28 million tonnes (mn t) in May’21, up by a marginal 1% month-on-month (m-o-m) against 7.34 mn t in Apr’21, according to provisional data released by the Joint Plant Committee (JPC).
3. Slow off-take in consumer durables sector:- Demand for coolers, fans, and air conditioners fell in the summer season due to regional lockdowns. This resulted in a drop in sales of consumer durables in the first two months of this fiscal. Typically, coolers and fans witness peak demand in the April-June period. Restricted sales of non-essentials in lockdown phases and odd hours of retail stores in unlock phase continue to limit sales of consumer durable.
4.End-user industry struggling on-demand front: Major automobile manufacturers like Maruti Suzuki, Hyundai, Mahindra & Mahindra, Tata Motors and, Hero MotoCorp, amongst others reported a double-digit decline in auto sales in May’21 compared to the previous month as a spike in Covid-19 cases and lockdowns across states hit production and dispatches.
5.Arrival of monsoon:- With the arrival of the monsoon season from mid-Jun’21 onwards, construction activities will remain halted. Also, demand in the monsoon usually remains sluggish. Thus, limited buying may drag down the prices in the near term.
Indian mills may further announce mid-month price hike due to following reasons:
1. Higher export premiums: Indian mills continue exploring export opportunities on higher price realizations.
- A major private steel maker is reported having booked around HRC cargo of around 20,000 t to the UAE at $1,050-1,055/t CFR for Jul’21 shipments.
- A major Indian steel manufacturer is reported to have booked around 20,000 t of HRC for exports to Turkey last week at around $1,015-1,020/t CFR basis for Jul’21 shipments.
- Fresh offers for Turkey are at $1,040-1,050/t for Jul-Aug’21 shipments.
- From Jul’21, Indian mills can export to the European Union since quotas are expected to be extended for yet another year with some changes in volumes.
2.Revival in steel demand:- Indian steelmakers are expecting a revival in steel demand as the lockdown has started easing in a few states. Companies are anticipating that improved demand may support elevated prices in the domestic market.
Near term outlook-Mills are likely to increase prices in the near term due to increased export premiums. However, it would be difficult to absorb further hikes because of poor sales in the traders market amidst regional lockdowns.
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