Domestic steel tightens on low inventories, raw material shortages; exports remain stalled – A-360 degree view

• Rebar prices rise sharply as inventories fall 20-25% and bookings remain strong
• Scrap and sponge iron shortages drive cost pressures while exports stay muted

How will the ongoing conflict in the Middle East affect global metals markets? As the US-Israel and Iran war escalates, BigMint presents a sharp update on the implications for the Indian metals, raw materials and energy markets:

India’s domestic steel market has entered a phase of tightening, with prices rising sharply on the back of low inventories and raw material shortages. Primary mills have increased rebar list prices by up to INR 2,000/t in early April, while trade-level prices have also moved higher week-on-week. Rebar inventories at mills have declined by around 20-25% month-on-month, supported by strong order bookings and continued focus on fulfilling project-linked demand. Mills are operating with low inventory levels of around 5-8 days, indicating tight supply conditions across the value chain.

This tightening is being driven primarily by constraints in raw material availability. Shortages of scrap and sponge iron, linked to ongoing geopolitical disruptions and supply chain constraints, have pushed input costs higher and supported price increases across steel segments. Induction furnace rebar prices have risen sharply during the week, reflecting both cost pressures and strong initial buying interest, although trading activity has increasingly turned need-based at higher price levels.

At the same time, export markets remain subdued. Indian HRC export activity continues to be limited, with no firm offers reported amid persistent disruptions across key shipping corridors such as the Red Sea-Suez Canal route and the Strait of Hormuz. Vessel diversions, longer transit times and elevated war-risk insurance premiums are increasing logistical uncertainty, keeping overseas demand muted and reducing export viability.

Brent crude is holding near $109/bbl, reflecting continued supply-side risks linked to geopolitical tensions in the Middle East. While there have been intermittent signs of easing in shipping flows, broader uncertainty across key energy corridors continues to sustain volatility in fuel and logistics costs.

However, freight markets are showing signs of weakness. Coal and iron ore vessel rates have softened amid limited fixture activity and cautious sentiment, indicating slower trade flows despite ongoing geopolitical risks. This is also reflected in raw material markets, where improved vessel availability and cargo arrivals have started to ease portside coal prices. South African RB2 (5,500 NAR) prices at Paradip have remained around INR 11,500-11,550/t in recent days after correcting earlier, reflecting improving supply conditions.

Scrap markets remain firm but uneven. Imported scrap offers in South Asia are holding at elevated levels, with shredded scrap around $400-405/t CFR, although buying interest remains weak with bids lagging below offers. Domestically, the market is showing regional divergence, with prices in northern markets rising modestly due to tighter availability, while western markets remain largely stable, indicating balanced supply-demand conditions rather than broad-based tightening.

Aluminium markets continue to reflect supply-side pressures. LME aluminium prices are holding steady near $3,465/t, with muted activity due to holiday-related closures and limited fresh offers. Domestic markets are facing tight scrap availability and logistical constraints, although primary ingot prices have shown slight softness, indicating a divergence between supply constraints and cautious demand conditions.

A weaker rupee near 95 against the dollar is further increasing procurement costs for Indian mills and smelters, adding to overall cost pressures across the metals value chain.

The market is now entering a phase where domestic supply tightness is driving price movements, even as external demand conditions remain weak. The sharp rise in steel prices, supported by low inventories and raw material shortages, reflects a cost-driven and supply-led rally rather than a broad-based recovery in demand. While prices may remain firm in the near term, sustainability will depend on whether demand strengthens or if easing logistics and raw material availability begin to moderate the current uptrend.