Trade market prices of hot rolled coils (HRC) spiked across key markets this week following the price increase announcements by major steel producers for early April sales. However, the end-buyers are concerned about the elevated price levels.
What factors are pushing up prices?
1. Mills steeply increase list prices for early April sales: Indian steel behmoths have steeply increased their list prices of HRCs and CRCs earlier this week. AM/NS India increased HRC prices by INR 4,000/t whereas JSW Steel raised HRC by INR 2,500/t and, for CRC, the quantum was INR 9,000/t respectively. Subsequent to the announcement, HRC list prices of both the mentioned mills stand at around INR 79,000-79,500/t exy-Mumbai basis. However, the list prices of CRCs from AM/NS India stand at INR 91,000-91,500/t exy-Mumbai, and that of JSW Steel at INR 86,500-87,000/t exy-Mumbai. The prices mentioned are exclusive of GST @ 18%. Rally in prices of raw material prices as well as coating materials in the past few months has been a major factor behind this steep hike by mills.
2. Export commitments of mills: Higher realisations in the overseas markets, especially Europe, and subdued trade activities in the domestic market have led to a shift in interest for mills towards exports since the beginning of CY22. Mills have thus filled up their export order books till May, 2022. For instance, HRC export prices to Europe had spiked up to $1,365/t CFR basis towards the end of March contrasted against $965-967/t CFR in mid-February, 2022. Furthermore, Indian mills have fully consumed their HRC and CRC quotas of 166,027 t and 147,656 t respective for January-March, 2022, as per data from European customs. Also, this has led to a disruption in supplies to the domestic market, which is yet another factor boosting prices in the trade segment.
3. Manufacturing PMI range-bound in March: The Purchasing Managers Index (PMI), a measure of the prevailing direction of economic trends in manufacturing stood at 54 in March, 2022 as against 54.9 in February, 2022. Although the PMI declined on slower manufacturing activities since September 2021, the same has outpaced its long run average.
Decline in raw material prices keeps procurement need-based:
Prices of raw materials have started declining in the past few weeks. For instance, the prices of Australian origin premium hard coking coal (HCC) dropped to $409/t CNF India as assessed on 7 April, 2022 contrasted against the highs of $704/t CNF basis as on 15 March, 2022, as per data maintained with CoalMint. Thus, in light of this downtrend, end-user industries expect the price levels to correct in the near term. Moreover, demand from the end-user industries remained need-based amid elevated price levels, which has kept trade market activities slow since the beginning of April. “Buyers are sticking to need-based procurement cycles amid steep increase in prices, which is keeping the trade momentum slow,” a trade source said.
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