The price spread between the benchmark HRC and the BF-grade rebar touched a historic high of INR 16,000/tonne (t) ($215) in mid-Jun’21, as per SteelMint data. Prices of both categories are trade-level and ex-Mumbai, exclusive of 18% GST.
Present average monthly domestic prices of HRCs are hovering around INR 67,500/t while the same for rebar are at INR 51,500/t. The spread has been widening since Feb’21 when it was at INR 4,200/t. It yawned to INR 5,100/t in Mar’21 and then galloped to INR 9,200/t in Apr, climbing further to INR 11,500/t in May to settle at a whopping INR 16,000/t in mid-Jun.
Benchmark HRC prices have risen sharply since Mar but rebar has not. For instance, HRC prices rose by more than INR 7,900/t in Apr over Mar. However, average monthly rebar prices rose barely INR 4,000/t in this period. May’21 HRC price rose over INR 3,500 m-o-m over Apr while the same for rebar was a slimmer INR 1,250/t. In mid-Jun, HRC prices were up INR1,500/t but rebar prices actually dropped INR 1,750/t.
HRCs on backfoot
It is not that HRC prices have too much scope to increase. In fact, prices declined by a further INR 1,000/t in the third week of June to INR 66,000-67,000/t, ex-Mumbai, minus 18% GST. The reasons are, of course, dull domestic demand, lack of export deals; and exhausted European export quotas for the current quarter.
No elbow room for rebar
But it is rebar prices that do not have elbow room to increase at present, which is contributing to the widening spread. In fact, major Indian mills are likely to cut finished longs prices due to following reasons:
- The mills are seeing inventory pile-up at yards for both large and small mills.
- Although mills have export allocations, there are not many overseas buyers because of lack of vessels, high freights and quarantine issues at foreign ports for vessels from India.
- There is limited offtake from the infrastructure sector due to liquidity issues amidst lockdowns and the monsoon.
BF-IF rebar spread narrows
Meanwhile, the price spread between the large and small mills is narrowing. Many secondary mills are planning to take a shutdown starting this week, Steelmint heard.
Outlook
Rebar prices of primary and secondary mills may further correct by INR 1,000-2,000/t and then find a bottom. HRC prices too have scope to reduce further.
Prices as on 8:55 IST, 01 Jul. d-o-d changes indicated against closing price of 30th June
Leave a Reply