- HRC prices remain rangebound in key markets
- Inquiries improve, but conversion to sales still a concern
- Imports can be viable if global prices decline further
- Supply concerns emerge as mills take maintenance shutdowns
Trade market prices of hot-rolled coils (HRC) witnessed mixed trends this week. Prices in a few key markets remained rangebound, while in some other markets prices either edged higher or witnessed a decline. Buyers continue to remain cautious and engage in need-based procurement. Demand varies across sectors, sources informed.
SteelMint’s weekly benchmark price assessment for HRC (IS2062, 2.5-8mm) stands at INR 59,000-60,000/t ($739-751/t), while CRC (IS513 Gr O, 0.9mm) prices are at INR 67,500-68,500/t ($845-858/t). Prices are exy-Mumbai, excluding GST at 18%.
Indian steel majors had announced their early-July sales list prices for finished flat products earlier this month. Subsequent to the annoucement, prices of hot-rolled coils stood at around INR 61,000-62,000/t ($764-777/t), while CRC was assessed at INR 68,000-69,000/t ($852-864/t). Prices mentioned are on an exy-Mumbai basis, and exclude GST @ 18%.
Factors weighing on market
a) SteelMint’s India HRC export index drops further by $5/t w-o-w: SteelMint’s India HRC (SAE1006, boron added) export index was assessed at $640/t FOB east coast this week. The index is inching towards the $635/t FOB levels last seen in early-December, 2020. The Middle East market remains muted since last Friday amid the Eid holidays and the Haj pilgrimage.
Vietnamese buyers continue to stick to domestic procurement. Steel major Formosa Ha Tinh (FHS) has reduced its skin-passed HRC (SAE1006) prices to $655/t CIF Ho Chi Minh City (HCMC) a couple of days back. Buyers are now awaiting a price announcement from Hoa Phat.
Demand from Europe remains subdued because of low steel consumption by the automobile and white goods segments amid high power costs and chip shortage. This has led to an inventory pile up with traders in the region.
Therefore, concluding export contracts remains a challenge, especially for Europe as there are fewer buyers for boron-added HRC in the region.
b) Inquiries improve but conversion to sales a challenge: Distributors in key markets informed SteelMint that the inflow of inquiries has improved since last week. “The inquires are flowing in at a better pace than a few weeks back. But buyers are still reluctant to book high volumes. Concerns about losses amid price drops are rife and bargaining continues,” a major distributor source in western India said.
Meanwhile, a distributor source based in north India informed: “Market demand seems to have picked up a bit. On one hand, the demand from infrastructure and construction projects is edging down amid seasonal disruptions; on the other hand, buyers from small- and medium-sized enterprises are floating inquiries.” Unlike the big projects, these buyers are inquiring for small quantities in order to gradually resume their operations after sitting on the sidelines for a long time.
c) Manufacturing indices data shows slow growth in June:
Increase in input costs and inflation concerns weighed on manufacturing activities till June, restricting the pace of growth. The manufacturing Purchasing Managers Index (PMI) grew by 53.9 points in June compared to 54.6 in May and 54.7 in April this year.
Meanwhile the Industrial Index of Production increased marginally by 2.05% m-o-m in May to 134.5, as per data from the Ministry of Statistics and Programme Implementation (MoSPI). Last month the index stood at 131.8. The IIP data comes after a month’s lag. However, it resonates the sentiments and the impact seen on PMI data for May.
Supplies impacted as mills opt for maintenance
A few among the major steel manufacturers were heard to have opted for maintenance shutdowns a couple of months ahead of schedule. The major reason has been piling up of inventories amid slow outflow of materials to the distribution channel. Continual decline in prices over the past couple of months and the slow buying rate are the other key reasons for mills preponing maintenance.
“Demand seems to be slow but steady, as it has been since prices started to drop in early April. Mills are adjusting to the reduced demand in the market and it would not be wise to say that the market demand has improved,” a Mumbai-based distributor told SteelMint.
HRC imports – at all an option?
Current price levels of HRC on the global market are at a marginal discount to domestic prices. But further drop in HRC prices may make HRC imports a lucrative option. For instance, the landed price of imports of Chinese HRC stands at around INR 57,202/t ($716/t), which is slightly lower than the trade market prices on exy-Mumbai basis. However, only BIS-certified mills in China can export steel to India, and there are only a few that have this certification.
Meanwhile, some Russian-origin parcel of HRCs were heard booked at $600-610/t CFR. However, SteelMint could not confirm the deal. These deals overall are being transacted in roubles and, in dollar parity, are estimated at $600-650/t, as per another source.
Near term outlook: Trade market prices of HRC and CRC are likely to remain rangebound in the coming few weeks amid slow and steady demand and limited supplies. Moreover, participants shall be closely watching the global HRC price movement, which is likely to keep weighing on domestic prices.
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