India: Steel prices drop INR 3,000/t in Jan, mills opt for roll-over

Indian mills have “rolled over” their Dec’21 prices for early Jan’22 deliveries. However, these prices are lower than the levels at which last month had begun.

It may be recalled Dec’21 prices had opened reduced by INR 2,500/t for HRCs to INR 67,500-68,000/t ($900-906/t) and INR 74,500-75,000/t ($993-1,000/t) for CRCs. In longs, December rebar prices had dropped by INR 3,000/t to INR 57,000-57,500/t ($760-766/t), and wire rods, by INR 2,000/t to INR 57,500-58,000/t ($766-773/t).

However, in the course of last month, mills, under pressure to liquidate inventory, resorted to discounts up to INR 3,000/t ($40/t) in flats and INR 2,000/t ($55,000/t) in longs. As a result, these list prices got further lowered. The price levels at which mills last liquidated their Dec’21 stocks — INR 64,500-65,000/t ($867-874/t) for HRCs and INR 70,000-71,000/t for CRCs — have thus got rolled over for Jan’22.

Why have prices corrected further?

• Inventory pressure: Mills have been facing the pressure of inventory with material not moving quickly enough, which goaded them to offer discounts on a case-to-case basis. “Towards end-Dec’21, material was being sold at INR 64,000-65,000 after discounts, which has been rolled over for Jan’22 deliveries,” informed a source.
• Omicron surge: Omicron is the talk of the town and no distributor is ready to block his funds in fresh inventory fearing a lockdown. There is apprehension that cases will peak by mid-Feb’22 which may impact demand and thus trade channels are in no mood to invest in fresh stock.“Omicron is keeping sentiments very low across flat and long steel downstream sectors,” said a source.
• Long products prices see lower correction: The quantum of correction in longs is lower than in flats. The reason is that the gap between primary and secondary rebar prices has narrowed further. Thus, the current prices of around INR 55,000/t will sustain for longs in the short term.
• Dull exports: Exports are dull at present. Mills’ offers of at least $720/t FOB levels (INR 53,000-54,000/t) are not matching buyers’ expectations in a subdued global market plagued by Omicron, severe winter, and chip shortage. At the same time, other exporting nations like China, Japan, Korea are weakening demand for Indian material.

Outlook

There is limited scope for further downward correction in longs prices because, even if lockdowns happen, these will be in the form of containtment zones which will not completely stall construction work. Moreover, government projects need to meet deadlines which will keep longs demand intact and deter mills from offering further discounts.

Flat products may see prices weakening further on dull exports scenario, China’s return to the export market, and the continuing chip shortage.