Major Indian steel mills have announced a correction in HRC prices by around INR 1,500-2,000/t ($20-26) owing to tepid demand and sluggish buying intertest. Domestic HRC prices touched an all-time high last month when mills raised prices sharply by INR 4,000/t in line with higher global prices. However, due to the onset of monsoons and stiff steel prices, traders are postponing purchases.
List prices of HRC mentioned below:
- JSW steel has reduced HRC prices by INR 1,500/t and is offering at INR 68,000- 68,500/t (exy-Mumbai).
- AM/NS India has also slashed prices by around INR 2,000/t and offering HRC at around INR 68,400-68,500/t (exy-Mumbai)
- Prices do not include GST extra @18%
- Other mills may follow suit and announce price revisions shortly.
Why domestic HRC prices are under pressure:
1.Significant fall in India’s HRC export offers- SteelMint’s Indian HRC (SAE 1006) export index stands at $920/t FoB east-coast basis, down by $70/t against $990/t FoB week-on-week (w-o-w). Indian mills are offering HRC to Vietnam at $950-960/t CFR this week, which was around $990-1000/t CFR last week. Also, Vietnamese buyers are less likely to procure from India and the Middle East has completed one round of bookings. This, in turn, creates pressure on mills to sell material in the domestic market at lower prices.
2.Disparity between trade and mill prices-This week SteelMint’s benchmark prices for 2.5mm hot-rolled coils (HRC) stands at INR 66,000-67,000/t (exy-Mumbai). The prices mentioned do not include extra GST at18%. Meanwhile, the list price of HRC now stands at INR 68,000/t and despite correction still there is a gap of INR 2,000/t between the trade price and mill prices which will keep domestic HRC prices under pressure.
3.Limited demand in the domestic market- Consumers are hesitant to procure material due to cost escalation of end products amid higher input costs of steel products. Meanwhile, traders are reluctant to purchase at higher prices since they are anticipating a price correction in the near term.
4.The arrival of monsoons- Due to the arrival of the monsoon season, trade remained sluggish due to limited enquiries. Usually, steel prices continue to remain bearish in this season due to dull demand. Also, a long pause in construction activities and weakening demand from the consumer durables and auto sectors are expected to impact prices.
Near-term outlook- Mills may announce further price support in form of rebates and discounts to propel buying in the domestic market. Poor sales in the domestic market and limited alternatives for exports have resulted in a correction in prices. Despite offering rebates there is a wide gap between mill prices and trade prices. Thus, domestic HRC trade prices are expected to remain under pressure.
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