Are primary steel mills in India mulling discounts, especially on flat products in the trade segment, to offset the present sluggish domestic demand? Trade sources hinted that discounting as a strategy is being discussed in some circles.
A leading eastern region-based mill, it is heard, has communicated to its distributors on rebates that could be offered but the market is not sure of the quantum.
A Faridabad-based distributor of the above, however, says, it is offering discounts of INR 1,500-2,000/ tonne (t). “There is no demand. But there is pressure from the mills to lift material,” he stresses.
The distributors of a major western India-based mill say the latter is offering a rebate of INR 2,000/t.
A leading public sector steel producer is also likely to announce discounts and sources indicate, currently, discussions are on.
For instance, a Hyderabad-based CRC trader is already selling lower at INR 81,000-82,000/t against the PSU’s billing price of around INR 84,500/t. “We are already selling at less than the billing price. So even if we get a credit note, we would still be selling at a loss. There is no demand,” the trader emphasises.
He adds that the PSU has offered a INR 1,500/t incentive on the billed price. “They will issue a credit note for INR 1,500/t, after which our landed price will be INR 83,000/t,” he says.
However, the trader informs the offer comes with a rider. He has to lift a minimum quantity to be eligible for the INR 1,500/t incentive. “If I lift 600 t in July, I will get INR 1,500/t rebate for June and July,” he reveals. This offer from the PSU mill is pan-India, SteelMint learnt.
A Mumbai-based distributor of a leading mill says it will discuss prices on a case-to-case basis for dealers and traders. Another distributor of an equally large mill informs: “I heard rumours of rebates but not sure of the exact amount yet.”
A primary mill insider, meanwhile, told SteelMint there is no announcement yet but looking at the price corrections in last month there could be some discounting. Mumbai HRC prices reduced from around INR 70,500/t in early Jun’21 to INR 67,000/t at present retail levels.
Mills say ‘no’
The mills, however, denied any discounting strategy. A source in AM/NS India says: “No discounts. Whatever we do, we do in our billing prices. Transparency of pricing is the policy of AM/NS India.”
A JSW Steel source says, “No it’s not true,” while SAIL informs “there is no rebate, as on date”.
Mills generally have 30-35% of their production allocated for export sales, with the balance distributed between long-term OEM contracts and trade segment.
At Tata Steel, Q4FY’21 domestic sales comprised 89% and exports, 11%. However, within domestic, branded and retail sales comprised 31%, automotive 17%, IPP 34% and the balance 7%, downstream.
For JSW Steel, in Q4FY’21, domestic sales comprised 75% and exports 25%. Within domestic, OEM’s share was 51%, retail 32% and auto 17%.
Outlook
The exports market has turned dull and is expected to remain so for the next few weeks. Domestic demand is down and not likely to rebound quickly. Faced with a double whammy, mills have no option but to offer sops at the trade level for liquidation of inventory.
Prices as on 8:55 IST, 02 Jul. d-o-d changes indicated against closing price of 01 July
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