Benchmark Hot Rolled Coil (HRC) prices in India, after gaining somewhat from the last week of Jul’21, have dipped slightly. Although the major mills, which are mainly the producers of flat steel, primarily HRC, are indicating they may opt for another price hike, the jury is still out on how feasible that would be for the downstream industries.
HRC prices, as per SteelMint’s data, stayed in the INR 64,500-65,500/t ($870 – $880) range for the better part of Jul ’21 but started gaining traction thereafter. Prices rose by around INR 1,500-2,000/ to INR 66,500-67,000/t (($895-$901) in the first week of Aug’21, compared to INR 65,500/t in the preceding week but are currently settled at around INR 67,000/t, on ex-Mumbai basis.
Reasons why HRC prices may stay subdued
However, SteelMint feels, price rises in HRCs are not likely or may not be feasible over the near term because of a few factors:
- Geographies like South East Asia and Europe, are not ready export destinations at present. The flat steel quotas for the entire year to Europe have been exhausted by the Indian mills. On the other hand, Covid cases are rising in South East Asian countries, including Vietnam, India’s largest flat steel importer, which has extended the lockdown for another month.
- The China factor is weighing on Indian exports too. With global economies shifting from a “rapid recovery” to a “stable recovery” phase, demand for Chinese goods is slowing down. If China’s exports of steel-intensive products start slowing, finished steel supply will increase within China’s domestic market. China’s imports drop m-o-m in Jul’21 points to subdued domestic consumption, which could be bad news for Indian steel exports.
- Exports determine domestic prices to an extent because of the high exposure to overseas sales. Flats have around 50% exposure to exports. For instance, out of the around 2 million tonnes (mn t) of exports seen in Jun ’21, semis comprised around 0.55 mn t, longs 0.25 mn t and flats, around 1.2 mn t. Therefore, a subdued exports market can compel mills to keep their domestic HRC prices subdued to entice buyers.
- Key HRC end-user segments like automobiles are facing challenges in the form of global semiconductor shortage and steep rise in commodity prices, namely steel.
Long products better placed
On the other hand, the rebar segment has seen some excitement, with mills having liquidated their inventory through export deals. Prices were raised in early Aug’21 by INR 1,000-1,500/t. Further, the buzz is that another price uptick in rebar and wire rods is in the offing.
Moreover, with the monsoon slated to recede Sept-end, stockists and traders would opt for construction steel inventory, a sentiment that would keep rebar prices buoyed.
Outlook
Mills do not have enough bandwidth at present to raise HRC prices in the near term. “Flat prices may be rolled over or probably come down. Feelers from the market are that, at least in the short term, the end-user segments will not be able to absorb any price hike,” observed a market source.
Prices as on 9:00 IST, 18 Aug. d-o-d changes indicated against closing price of 17 Aug.
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