HR Coil prices remain stable as demand from the domestic consumption sector refused to pick up. Domestic manufacturers are cautious to increase the prices due to improving prospect of imports. Trading across major cities remain muted as industry still awaits policy clarity and stability in the raw materials supply.
Current offers are pertaining in the range of INR 37,000-38,000/MT for HR Coil 2.5 mm on Ex-Site basis. Ludhiana offers remain unchanged at around INR 38,700/MT as demand from auto ancillary units is firm. But, demand from other manufacturing units was low. Trading volumes didn’t show any major recovery. Traders believe that it will take another two quarters for the trading volumes to increase.
Similarly, HR Coil 2.5 mm prices traded at around INR 36,500/MT in Jamshedpur, INR 37,000/MT in Kolkata and INR 37,400/MT in Bellary.
Battling the Twin Problems
Flat steel industry has been caught in a twin problem, since the domestic demand from steel consumers haven’t improved till now and concerns regarding procurement of raw materials have increased. Industry veterans believe that shortage in raw material can affect the domestic manufacturer’s production. JSW Steel, one of the leading players in the Flat steel industry, has reported rise in its crude steel production in Apr’14 by 14% Y-o-Y. However, rising concerns for raw material may put pressure in its margins.
Some, market participants speculate that this may increase prices of finished Flat products. But, a lack of demand in the domestic economy and improving import feasibility will force manufacturers not to go for any major price hike.
Domestic finished steel production is likely to encounter a blip owing to temporary shortfall in key raw material. If the domestic demand for finished steel picks up in the second half of FY15 and there is shortage of finished steel in India, an appreciating INR will trigger imports from Japan, Korea & China.
Currently, HRC offers from China are at around USD 540-550/MT CFR Mumbai. Prices are expected to correct further as Chinese FoB prices have declined by USD 5-10/MT in past few weeks.
Import Parity
Import feasibility has improved significantly as the Indian currency has traced back to the levels of 58.22. As per an importer based in India, imports of HR Coils haven’t picked up significantly, whereas imports of CRC are quite strong. Imported HRC 2.5 mm is offered at around INR 39,200-40,000/MT in Mumbai, whereas domestic prices in Mumbai trades almost at par within 38,000-39,000 levels. Domestic manufacturers are closely observing the movement of currency since this is going to determine the pricing in upcoming days.
One of the officials of a primary manufacturer said,
If we increase our prices now, we have to again slash our prices after two months, since volume of imports will pick up significantly in this period. We are currently in a wait & watch mode and will take a decision on pricing after considering the volatility in exchange rate.
*Note: All prices are basic reference prices
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