Indian domestic trade prices of hot-rolled coils (HRC) slumped to a 6-month low on the back of a continual decline in export offers and subdued domestic demand leading to rising inventories in the domestic market.
SteelMint’s benchmark HRC (IS 2062, 2.5-8mm) prices were assessed at INR 63,500-64,500/tonne (t) (down, INR 1,100/t), while those of CRCs (IS 513 Gr O, 0.9mm) were at INR 68,000-69,000/t (down INR 1,100/t). These price levels were last observed in end-July’21. Prices mentioned above are on an exy-Mumbai basis, and exclusive of GST @ 18%.
Why are domestic prices under pressure?
Indian HRC export index hits 9-month low
India HRC (SAE1006) export index dropped further from $773/t last week to $750/t (down $23/t) FOB east coast, as buying interest in the overseas market continues to remain low with the approaching Christmas and the new year holidays, turning buyers less active. Current export offer levels were last observed in mid-Mar’21.
Export offers are likely to remain under pressure in the near term with demand-supply mismatch playing an upper hand. The Indian finished steel exports volumes have fallen to a nine-month low as demand from Europe and Vietnam have completely dried up. Data maintained with SteelMint reveals, exports dropped almost 29% m-o-m to 0.91 million tonnes (mn t) in Nov’21 compared to 1.28 mn t in Oct’21.
Decent inventory among traders, distributors
Trade channel check shows that distributors are holding enough inventories in hand owing to low sales at the current price levels. This, in turn, is keeping domestic HRC prices under pressure. “Consumers are delaying their purchases in anticipation of a further decline in prices,” said a major distributor from Faridabad.
Slow Industrial Production Index (IIP) to keep steel consumption subdued
India’s Industrial Production Index (IIP) output grew by just 3.2% y-o-y in Oct’21 at the slowest pace in eight months, data released by the Ministry of Statistics and Programme Implementation shows. The output of the manufacturing sector, which accounts for over three-fourth of the total weight of the index, grew by a mere 2% y-o-y in Oct’21. Subdued consumption and investment trends imply that the heavy lifting to take the economy out of sluggish growth has to be done by the government. The demand recovery is still being seen as tentative as the Omicron variant of Covid-19 could be a disruptor in the coming months. Going ahead, IIP is expected to be less than 3% in spite of a low base (-1.6% in Nov’20), as per chief economist of a leading credit rating agency.
Near-term outlook
Looking at the continual correction in HRC trade prices and concerns over increasing stockpiles on the back of sluggish overseas demand, Indian mills are likely to correct list prices by INR 1,500-2,000/t for early Jan’22 deliveries, SteelMint understands from reliable industry sources.
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