India: Domestic HRC prices in trade segment decline sharply on limited inquiries

Key highlights:

• Trade segment prices slide by INR 1,500/t ($21) w-o-w
• Price gap between mill’s offer and trade price narrows
• Mills eye for exports in Europe as prices in Vietnam and Middle East decline

This week, regional prices of HRC and CRC reported a decline on the back of lower trade inquiries and softening demand among buyers. Consumers have stalled their purchases and are anticipating a further decline in domestic prices, shared a major distributor in Faridabad region. Prices have declined by around INR 1,000-1,500/t w-o-w in North India and around INR 500-750/t in other markets.

SteelMint’s trade reference prices are mentioned below:

• HRC (IS2062 2.5-8mm) stood at INR 56,500-57,500/t (exy- Mumbai), INR 56,000- 57,000/t (exy-Delhi), and INR 57,000-59,000/t (exy- Chennai).
• CRC (0.9 mm GR) is around INR 68,000-68,500/t (exy-Mumbai), INR 66,000- 69,000/t (exy-Delhi), and INR 67,000- 71,000/t (exy-Chennai).
• Prices do not include GST @18%

The second price hike was not absorbed in the market –
SteelMint learned from its market participants that the second hike announced by major steel mills didn’t get absorbed. However, Indian HRC export market has witnessed some momentum. An Indian private mill has concluded HRC (re-rolling grade) export deal for Europe at around $840/t CFR, credible sources have reported to SteelMint. Although the quantity could not be confirmed, it was heard to be around 20,000t.Indian mills are eyeing HRC export offers mainly to Europe on higher price realizations as compared to Vietnam or Middle East.

The gap between trade and mill price reduces-
As per SteelMint benchmark trade assessment prices HRC (IS 2062 2.5 – 8mm) is hovering at around INR 56,500-57,000/t (exy-Mumbai). Meanwhile, the mill prices are hovering around 55,500-57,000/t (exy-Mumbai). Thus the premium on trade prices reduced on limited buying inquiries.In the last week of Dec’20, this gap between trade and mill prices used to be around INR 4,000-5,000/t on robust buying in the traders market.

Softening international prices-
Chinese steel manufacturers have cut their export offers significantly by $70/t w-o-w to $640-650/t FoB China. Last week’s offers stood at a $650-710/t FoB basis. Thus, softening global HRC prices have also impacted trade sentiments in India. Traders are expecting a significant drop in domestic HRC prices on falling global offers.

Major steel mills planning for a further hike in prices
On contrary to this, major steel mills are planning to increase domestic flat steel prices by around INR 1000-1500/t in the near term. Few mills are also planning to announce a mid-month price hike. However, trade sources are of the view that further price hike will be difficult to absorb since traders have lowered their procurement levels.

What may happen?
If regional prices soften further and mills continue raising steel prices then traders will have to sell the material at lower prices. Trade prices may come under pressure in the near term if market sentiments continue to remain bearish on limited trades.