After July’s decent export performance amid sluggish domestic sales, how will the Indian steel market perform in August? Will prices rise, will exports sustain? Both factors are, of course, intertwined.
Prices
There are a few factors which may allow prices to sustain at current levels or perhaps increase marginally.
- Mills have done considerable export bookings in Jul’21, comprising 95,000 tonnes (t) of rebar and 300,000 tonnes (t) of billets and blooms, apart from 200,000 t of HRCs.
- Sections of a primary mills have gone into maintenance shutdown, which can create a case for short supply in flats and this can support a slight price increase.
- In longs, prices have probably reached the bottom of the barrel. With the mills having liquidated substantial inventories through exports there is not much pressure on them at present. Hence, they may see scope for a slight price hike.
“Prices may not increase but will definitely not decrease from here, at least for longs, which are already at a discount to flats. So we see limited scope of prices going down from these levels. Flats prices have some room to increase because mills made decent bookings in July,” said a market source.
Exports
Exports are a factor of domestic prices. For sustaining or increasing domestic prices in flats, mills will have to sustain the pace of export bookings seen in July. The only issue is that Vietnam is slightly off the market at present because of rising Covid cases and lockdowns which have dented domestic demand. Hence, end-users there are not buying so actively.
There is talk of the next Covid wave in Europe, which can dampen demand.
Because of the above factors, a steep correction is not on the cards for flats. May be, at best, July price levels will continue into August,” the source added.
China’s impending export tax
Indian mills are awaiting China’s export tax which will benefit them, once implemented. The Russian export tax, to come into effect from 1 Aug’21, has already been factored into the prices and purchases made in Jul’21 for the Aug-Sept shipments. “That is why we heard of active bookings from India to non-conventional markets like South Africa, South Korea and Turkey,” said a source.
“In case the China tax comes into effect and Indian mills are able to make further bookings, there is room for an upward trend in flats prices. Because margins are high in flats exports, steelmakers will not mind if they have to cut domestic prices in Aug,” said a source but warned that this scenario depended entirely on how exports play out next month.
Dull domestic demand a factor
Even if mills contemplate raising flats prices in Aug, based on the logic that the landed costs of imported HRCs are higher, sluggish domestic demand may not be able to support the price hike.
Prices as on 8:50 IST, 29 Jul. d-o-d changes indicated against closing price of 28 July
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