India: Domestic HRC prices correct over subdued demand

Indian HRC trade prices declined sharply by INR 1,500-2,000/tonne (t) this week due to sluggish demand in the market. However in Mumbai, prices remained largely moderate. SteelMint’s benchmark prices for 2.5mm hot-rolled coils (HRC) stand at INR 66,000-67,000/t (exy-Mumbai) this week. The prices mentioned above do not include GST  @18%.

Domestic HRC trade prices remained under pressure due to the following reasons –

1. SteelMint HRC export index drops sharply: Decline in Chinese HRC export offers and recent sales of Russian cargoes through traders pulled down the global price sentiments. SteelMint’s Indian HRC (SAE 1006) export index stands at $920/t FoB east-coast basis, down by $70/t against $990/t FoB w-o-w. Disparity between bids and offers kept trade  to the traditional export destinations like Vietnam and the Middle East absent this week.This, in turn, impacted the domestic steel market.

2.Indian mills likely to announce rebate to push buying: Major Indian steel mills are likely to announce rebate by around INR 2,000/t to push buying in the domestic market. However, official announcement is still awaited. Poor sales in the domestic market and limited alternatives for exports led to a correction in prices. Despite offering rebates, there will be a wide gap between mill and trade prices. Thus, domestic HRC trade prices are expected to remain under pressure.

3.Demand continues to remain dull: Traders are awaiting price clarity from the mills since they are resisting purchases at higher prices. ”There are more sellers in the market compared to buyers,” informed a major distributor based in the Mumbai region. The market is bearish and traders have sufficient inventories in hand. Hence, they are less likely to procure HRCs at higher price levels.

Near-term outlook: Domestic HRC prices are expected to correct in the near term due to the arrival of the monsoon and sluggish demand among buyers. Meanwhile, reduction in HRC export premiums led by reluctance of overseas buyers to book at higher prices, impacted sentiments in the domestic market.