The price spread between cold rolled coils (CRCs) and hot rolled coils (HRCs) has widened to an unprecedented INR 16,000/tonne levels. Interestingly, this gap has been sustaining since end-May ’21 SteelMint’s data reveals.
The historical price gap between both items has been around INR 4,000-6,000/tonne (t), with CRCs always costlier than HRCs. However, the price gap breached the INR 10,000/t mark around Oct’20 and again in Jan’21. Thereafter, the spread has ranged from INR 10,000/t-15,000/t till 19 May’21. Eventually, from 26 May’21 till date, the spread has been consistently at a record INR 16,000/t levels, even breaching the INR 16,500-mark in mid-Jun’21.
Why has the spread widened?
SteelMint understands that substantial volumes of CRCs have been exported by the steel mills to the European market, where automobile demand shot up by over 75% year-on-year recently.
In fact, total CRC exports from India in Jan-Apr’21 stood at 0.22 million tonnes (mn t) over 0.13 mn t seen in the same four months in CY’20, a rise of over 69% y-o-y.
In May’21, exports of CRCs rose to 0.11 mn t, against 0.07 mn t in May’20.
Almost 86% of the exports in Jan-Apr’21 went to Europe, comprising 0.19 mn t in the total 0.22 mn t corpus, up 137% over 0.08 mn t in Jan-Apr’20 (to Europe).
The EU quota in CRCs for Jan-Mar’21 was 1.5 lakh tonnes and Apr-Jun’21, at 1.52 lakh tonnes.
Consequently, the domestic market is seeing a supply crunch.
Total CRC production in India is at around 1.62 mn t, as per SteelMint data.
Prices – As a result, CRC prices have shot up from say around INR 68,400/ levels exy-Mumbai, exclusive of GST @18%, to INR 82,000/t-INR 84,000/t levels currently.
End-users hit – Although domestic demand for CRCs is not exactly huge, there are certain dedicated end-user segments led by auto and auto ancillary, followed by fabrications (consumed in almirahs, wardrobes etc) and consumer durables.
However, the end-users have taken a hit due to the Covid second surge and sources say these segments will first have to make up the drop in sales and then grow additionally and it will take at least two months to revive provided another lockdown does not come knocking.
“It is not that domestic demand for CRCs has suddenly shot up. Demand is subdued. But mills have exported good quality CRCs which has led to a crunch in the domestic market and consequent rise in prices,” said a source.
Prices as on 8:55 IST, 25th June. d-o-d changes indicated against closing price of 24th June
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