Recently, SteelMint has acknowledge from its market sources that Indian manufacturers are likely to increase the domestic HRC prices by 1500-2000/MT (USD 22-29) on account of higher production cost.
Higher coking coal and iron ore prices is driving the Indian manufacturers to increases the flat products prices so that the increased cost can be passed to the consumers.
A leading steel giant JSW has also commented in its recent investors call that average coking coal prices is USD 103/MT in Q2FY17 and the company also reported that it will rise significantly in Q3FY17.
Current offers of 2.5mm HRC are assessed at INR 32,500-33,000/MT (ex-Mill) equivalent to USD (477- 485). While offers from (ex-Mumbai and Delhi) are hovering in the range of INR 38,500-39,000/MT.Prices include excise duty of 12.5%.
Negative impact of Demonetization:
Demonetization policy levied by Indian government to ban the INR 500 and INR 1000 denominations notes with the motive to curb black money has severely affected the sales volume of the flat products in domestic market.
This policy has bought liquidity crunch in the domestic market due to which sales number of HRC coils started to shrink and badly impact the sales of further applications of HRC in the Indian market.
Secondary manufacturers remain under stress these days as mostly the business in rural areas and in small sized mills is done on cash basis.
However, despite liquidity crunch any price hike by the Indian manufacturer will not be accepted by the market.
Although, traders and stockiest are finding it difficult to clear out the old inventories and they won’t mind selling them in discounts, if the demand starts picking up in the market.
Depreciating Rupee Supports Indian Exporters:
Recently, Indian rupee depreciates by 3% to 68.86 against the US dollar on Thursday. The rupee has by far fallen low this month. Depreciation in Indian Rupee value has given enough scope for the domestic manufacturers to allocate more quantity of exports in global market.
Currently, export offers of HRC from India are heard to be in the range of USD 490-500/MT, FoB basis.
Mixed Response From the Market.
Domestic market is consumed with the mixed response as market participants mention that Bokaro Steel Plant whose production capacity is 3 Lakh Tonne has produced 1 Lakh Tonne in the month of Nov ’16 amid water crises in the plant. Hence, on account of lower production, rise in HRC prices may be accepted by the market.
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