Trade reference prices of hot-rolled coil (HRC) have dropped by around INR 2,000/t ($24/t), while that of cold rolled coil (CRC) fell by INR 2,700/t ($33/t) in the first 15 days of December 2022.
Slower conversion of enquiries to sales amid cautious buying, and active bargaining continued weighing on trade level prices over the past few months.
SteelMint’s benchmark assessment for HRC (IS2062, 2.5-8mm) stands at INR 53,000-54,000/t ($641-653/t) and CRC (IS513 Gr O, 0.9mm) at INR 59000-60,000/t ($714-726/t) as assessed on 14 December. Prices mentioned are on an exy-Mumbai basis, excluding GST @ 18.
Factors driving trade decline since early Dec?
1. Surplus inventory in domestic market: Demand-supply dynamics have played a major role behind the decline in the domestic prices over the past few months. For instance, limited export bookings over June-November 2022 period amid the levy of 15% export duty on non-alloyed finished steel products on 21 May 2022, increased the supplies in domestic market. Indian mills exports over the January-November 2022 aggregated to around 3.09 mnt contrasted against 6.08 mnt in the year ago period.
However, in the aftermath of the duty removal w.e.f. 19 November 2022 Indian mills have booked HRCs for exports in decent volumes to the European, Vietnamese, UAE and Turkish markets. This has eased off some of the pressure that were draining down on the domestic market prices.
2. Availability of cheaper overseas alternatives: Landed cost of imports from Japan- having a free trade agreement (FTA) stood at a discount of almost INR 8,410/t ($102/t) while that from China around INR 3,320/t ($40/t) as computed on 1 December 2022. This had kept exerting pressure on domestic trade prices.
A vessel holding 30,000t Russian origin HRC is heard to be inbound and is likely to arrive at Mumbai port around 25 December 2022, as per the vessel line up data maintained with SteelMint.
However, with the global HRC prices on a rise and a few countries like Japan withdrawing offers amid currency appreciation, along with the downward movement of domestic prices has narrowed the gap.
3. End-user demand sluggish; industrial output under pressure: End-user demand in the traders’ market remained lacklustre in the first fortnight of December. “Buyers adhered to cautious buying and bargained actively amid availablity of cheaper imports booked earlier and the expectation of further decline in prices,” highlighted a few distributors from the western region.
Also, industrial output crashed by 4% in Oct’22, worst performance in over two years indicating the sluggishness prevailing in the economy. India’s industrial output, as per the Index of Industrial Production (IIP), crashed by 4% in October, data released on December 12 by the Ministry of Statistics and Programme Implementation showed.
With the output having increased by 3.5 % in September, the latest figure shows industry growth returned to sub-zero territory after a gap of just one month.
Manufacturing index which constitutes around 78% was the worst performing sector in October, with its output contracting by 5.6%.
Near term outlook:
Trade market participants are indicating that price levels have bottomed out and are indicating that mills may increase HRC and CRC prices for January 2023 sales on the back of an uptick in overseas prices.
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