Will finished steel prices look up in Aug ’21? What factors could act as price influencers in the upcoming month? SteelMint takes a look.
1.China’s output curbs: The government’s strict output curbs will propel the mills to increasingly import billets and this could allow Indian mills to explore export options. This scenario will support global semis prices and, in a spin-off, Indian billets prices too. Already, Indian mills are expecting a recovery in billet export prices on the back of rising Chinese futures. A tender for around 20,000 tonnes (t) of billets fetched bids of $610/t FoB, although SteelMint is yet to confirm the destination. A private mill is offering 30,000 t billet parcel at around $690/t CFR levels.
2.Rising Chinese steel futures: The Shanghai Futures Exchange (SHFE) steel indices are on an uptrend. Over the last fortnight, HRC futures have shot up by RMB 615/tonne (t) or $90/t and rebar by RMB 554/t ($85/t). Since the futures are intrinsically linked to China’s production curbs, the uptrend is likely to sustain for some time. It was heard, large mills are purchasing billets at $660-665/t CFR levels to only speculate at higher levels in the futures market. Rising futures will pull up spot prices.
3.Russian export tax: The Russian government will impose export duties on all steel products at the rate of 15%, which would be a minimum of $54 per tonne, effective 1 Aug’21. The move may limit some volumes from Russia, which is the third-largest steel exporter and largest billets exporter globally with almost 13 mn t annually. If some Russian volume goes out of the market, it will prop up billet prices globally. Again, Indian mills stand to benefit.
4.Lockdowns easing: With lockdown restrictions easing, labour availability should improve and construction work may also resume. Some amount of interior and fabrication work is possible in the rainy season which will improve finished steel demand, and this can firm up prices.
5.Firm scrap prices: Globally, scrap prices are firm and may remain so on higher demand. UK/EU-origin shredded offers are hovering around $540/t CFR while UAE-origin HMS are at $480/t CFR and UK HMS at almost $500/t CFR. But, Indian mills are not buying at such elevated levels. However, if demand improves in Aug, mills may be caught without adequate raw material. This scenario may support elevated finished steel prices.
Challenge
The only hurdle could be the impending third wave of the pandemic, with opinions divided on when it could unleash in the country. If it happens, demand will again come under pressure, and, with it, prices.
Prices as on 8:55 IST, 09 Jul. d-o-d changes indicated against closing price of 08 July
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