Trade-level prices of Indian hot rolled coils (HRCs) continued to slide down in most of the markets barring Mumbai, as per the assessment on 9 November, 2022. Slow activties in the domestic market, weaker global sentiments and the pressing issue of reduced export volumes since the levy of the 15% export duty in end-May 2022 are weighing on buyers’ interest in the domestic market.
Last week, major steel producers had announced a roll over in the list prices of flat steel for November compared with early-October sales. Post-revision HRC list prices continue to hover at around INR 57,000-58,500t/ while those of cold rolled coils (CRCs) are at INR 65,000-66,800/t exy-Mumbai, excluding GST @ 18%.
SteelMint’s benchmark assessment (weekly) of HRCs (IS2062, 2.5-8mm) for the trade segment stands unchanged at INR 56,000-56,500/t while that for CRCs (IS513 Gr O, 0.9mm) dropped marginally by INR 200/t to INR 63,000-64,000/t. Prices mentioned are on an exy-Mumbai basis, excluding GST @ 18%.
Factors impacting current market scenario:
1. Slow resumption of market post–holidays: Market activites have been slow to recover post-the festive holidays observed in October, sources highlighted. “Expectations were that demand would get a boost from major steel-consuming sectors post-Diwali. However, market partcipants have been slow in resuming activities,” distributors in western India told SteelMint. Moreover, restrictions on construction-and-demolition activities and movement of commercial vehicles in the nothern provinces, especially the capital of New Delhi and neighbouring regions, has kept demand low.
2. Exports drop, imports turn viable: Domestic steel availablity has increased since the goverment levied the export duty on 21 May 2022. The move was made to arrest the steep increase in prices of flat steel products. It may be recalled, trade-level prices of HRCs had hit an all-time high of INR 78,800/t exy-Mumbai in the first week of April 2022, as per SteelMint records. This downtrend has led to a steep 51% decline in SteelMint’s India (SAE1006) export index, which was assessed at $518/t FOB east coast India this week from the peak of $1,065/t FOB seen in end-March 2022.
On similar lines, HRC export volumes too fell to a meagre 18,458 t in September 2022.
On the other hand, HRC imports have made some headway since August-September. Some import bookings were heard from Japan that are arriving in India by November-end.
Meanwhile, some Japanese HRC cargo was heard booked at $590/t CFR India, and towards last weekend another 40,000 t of HRCs were booked from Japan at around $550-580/t CFR levels. However, these deals could not be confirmed till the time of publishing the article.
Few industries show better performances: Market participants were expecting the infrastructure and construction industry to witness a boost in the second half of the fiscal. However, a few other industries have performed well in this period. The automotive industry has been performing better for the past few months. The Diwali 2022 festive season sales of vehicles were at 2,888,131 units, surpassing the 2,729,338 units seen in the corresponding period of 2019, as per data released by Federation of Automobile Dealers Association (FADA). The festive sales declined sequentially in 2020 and 2021 amid Covid-led restrictions.
Moreover, commercial vehicle sales, which accounted for 3.66% of total festive season sales in 2022, increased by 29.5% against 2021. This would open up demand from the panel and fabrication industry as well.
Near term outlook:
Trade-level HRCs and CRCs might continue to remain under pressure in the near term amid slowly recovering domestic demand, restricted exports and volatile global prices. Prices would decline at a slower pace as there are a few industries actively procuring and mills have good order book volumes. Furthermore, a few mills are operating at lower capacity utilization and this might restrain mills from dropping their list prices too much.
Meanwhile, there are indications of incentivizing steel exports over-and-above the lifting of the 15% export duty by the government, although a decision on the same is impending.
Leave a Reply