Indian primary mills may lift rebar prices for Aug’21 deliveries

Rebar prices through the blast furnace (BF) route may strengthen for next month’s deliveries, ie, Aug ’21, despite mills experiencing selling pressure in most regions due to the monsoon which generally slows down construction activities. That apart, production cuts and logistical issue relating to raw materials are also weighing on mills.

Factors that may contribute to marginal price hike

BF-route rebar prices produced by large mills may see a slight hike because overall finished long steel prices may see a marginal uptick or stay largely stable.

• BF-IF-grade price gap narrows: The price gap between BF-grade and induction furnace-route rebar has narrowed. Therefore, the price rise could be absorbed. Surprisingly, a few sources said small volumes of induction route rebar deals were concluded at prices higher than BF-grade in specific regions.

Generally, IF-route rebar prices are lower by INR 3,000-4,000/t, but this gap has narrowed to around INR 2,000/t in a few locations.

• Optimistic global trends: The rise in billet export offers indicates positive sentiments in the global market. Indian primary mills, following this trend, are largely engaged in billet exports and are booked well in Jul for till Aug-Sept deliveries. Indian billet export offers jumped up by $50/t, after touching a low of around $590/t FoB India during the first week of Jul.
• Export orders: A couple of large mills have secured adequate rebar export orders amounting to 100,000 t to South East Asia destinations, which may slightly impact domestic supplies.
• Fall in production: Further, in Jun’21, monthly finished long steel capacity utilisation has been significantly reduced by up to 27%. Production by the large mills (BF route) has dropped by 15-25%, and by 27% m-o-m for secondary (IF-grade) mills.
• Inventory range: Increased logistic charges too are hampering buying sentiments amid skyrocketing fuel prices. A few developers are facing cost overruns, whereas retailers are largely quiet, weighed down by existing inventory. However, a few locations saw moderate inventory liquidation.

A marginal price hike, especially in rebar, by around INR 1,000-1,500/t can be expected in the near term, as per SteelMint’s analysis.