- Mills reduce list prices significantly for June sales
- As mills withdraw from overseas markets, pressure builds up for domestic sales
- Market participants anticipate further softening in prices
Steel prices announced by the primary steel producers for June sales edged down sharply from prices in early May. Declining prices in the overseas markets and subdued demand in both the domestic as well as global markets weigh on sentiments, in turn, pulling prices lower.
Mills’ list prices for June
- JSW: HRC (IS2062, 2.5-8mm) at INR 65,350/t ($844/t) and CRC (IS513 Gr O, 0.9mm) at INR 72,850/t ($941/t)
- AM/NS India: HRC (IS2062, 2.5-8mm) at INR 65,000/t ($839) and CRC (IS 513 Gr O, 0.9mm) at INR 73,000/t ($943/t)
- Others are yet to announce their price revision.
- Prices mentioned are on an exy-Mumbai basis, excluding GST @ 18%.
SteelMint’s benchmark price assessment for HRC stood at INR 63,500-64,500/t ($820-833/t), down steeply by 2,300/t ($30/t) w-o-w, while CRC prices fell by INR 2,800/t ($36/t) to INR 72,500-73,500/t ($936-949/t). Prices are basic excluding GST at 18% on exy-Mumbai basis.
Why mills resort to price reduction?
1. Withdrawal from overseas markets post export duty announcement
With the government slapping the 15% steel export tax, India’s primary mills, which are major exporters, have gone on the backfoot. This has led to inventory build up in the domestic market forcing mills to take a re-look at their price levels.
“There were no export offers this week and mills are mostly busy figuring out the implications of the export duty on already concluded deals or for those which have the line of credits (LCs) opened,” shared a source.
“With the levy of export duty on flat steel products, the exports of HRC are going to be slow exerting more pressure on the mills to sell domestically. Thus, having more supplies in the domestic market, the prices are likely to remain under pressure,” said a distributor source based in western India.
2. End-user segments defer buying: In a falling market, the end-user segments resorted to a wait and watch approach as they expected further downward correction in prices as steel inventories are likely to build up as monsoon approaches in India. End-user buying is likely to gain momentum post monsoon. For instance, the auto contracts for April-June 2022 may get delayed further as automakers are expecting steel prices to drop further against the backdrop of the government’s recently announced export duty levy on finished steel amongst other items.
3. Economic indicators projecting sluggish growth: India’s GDP is estimated to have grown by 8.7% in FY22 after growth slid to 4.1% in January-March quarter (Q4FY22), lowest in four quarters. The high growth figure is largely due to a favourable base effect, with the economy having contracted by 6.6% in FY21. If the GDP for FY’22 is compared to that of FY20 – before the pandemic hit the economy – the growth rate is a mere 1.5%. FY’22 saw the manufacturing sector making a robust return, expanding by 9.9%. However, as per the latest data for January-March, the sector contracted by 0.2% year-on-year, likely reflecting the fallout of the Russia-Ukraine war.
Near term outlook
India’s factory output momentum stays firm as manufacturing PMI for May declined marginally to 54.6 from 54.7 a month back. While the situation looked firm on the output side, price pressures continued to build on top of already elevated levels. These cost burdens continued to be shared with consumers, with selling prices being raised by the most in over eight-and-a-half years – consistent with Consumer Price Index (CPI) inflation hitting a near-eight-year high of 7.79% in April.
Steel demand showed signs of resilience in May; however, end-user industries remain cautious and are likely to curtail new orders by switching to needs-based buying as price levels remain under pressure.
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