Domestic prices for hot-rolled coils (HRC) continued to decline this week too in key regions on the back of a decline in raw material prices, drop in HRC export offers and subdued domestic demand. The market lacks active participation as the stakeholders await price announcements by mills for the month of September.
SteelMint’s benchmark price assessments of 2.5-8 mm IS 2062 HRC fell by around INR 800/t to stand at around INR 65,000-66,000/t (exy-Mumbai), and CRC (IS 513 Gr O, 0.9mm) prices dipped by around INR 1,300/t to INR 75,000-76,000/t (exy-Mumbai) as against the previous week’s INR 76,500-77,500/t (exy-Mumbai). The prices mentioned above are exclusive of GST @18%.
SteelMint relates factors weighing on prices and buying interest:
1. Iron ore prices continue to fall: SteelMint’s weekly Odisha iron ore fines (Fe 62%) index has moved down by around INR 1,200/t to INR 6,900/t (ex-mines, including royalty, DMF and NMET). Also, the prices have come down by INR 2,300/t since the end of July. Furthermore, with a decline in prices of the upstream product– pellets– due to the absence of exports, it is likely that prices of fines will continue to go downward. “Trade channel partners are waiting for the decline in iron ore prices since end-July to be factored into the steel prices, which is likely to bring down the prices in the trade segment,” said a major dealer from southern India.
2. Decline in HRC export offers: The Indian HRC export offers too have fallen by $23/t this week as the buyers remain observant about the probable announcement of an export tax by the Chinese government. Meanwhile, the South East Asian countries remain under the influence of increasing Covid cases. SteelMint’s India HRC export index stood at $879/t FoB east-coast basis against the previous week’s $902/t FoB India.
3. Auto sector supply-side constraint a major challenge: Most of the auto giants have posted a decline in their sales volumes on a monthly basis in August. Production has also been hampered by the semi-conductor shortage, which has led to lower consumption from this sector lately. This issue is likely to persist for some time now. Maruti is likely to slash its production by up to 60% in September. Also, Mahindra & Mahindra Ltd (M&M) has announced “no production days” for about a week in Sept’21, which will impact around 20-25% of production. This in turn is likely to impact domestic demand for HRC and CRC.
Near-term outlook
Market sentiments remain bearish in the trade segment. Distributors and dealers continue to feel the pressure of procuring from the mills in the absence of healthy demand. Meanwhile, lack of buying intent among end-users has led to a stagnation of inventory in the supply chain. “Most of the downstream flat steel-consuming industries have delayed their procurement, anticipating a further decline in prices in the coming weeks,” said a major distributor from northern India.
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