Indian primary steel mills have increased contract prices of rebars to the tune of INR 1,000/t ($12/t) for early-October 2022 sales, sources informed SteelMint. Post-revision, the effective prices stand at around INR 56,000-56,500/t ($686-693/t) on FOR Mumbai basis.
What factors are lending support to the project-level prices?
1. Record demand for housing continues: Fuelled by strong demand, residential sales across the top eight cities of India have continued to show robust growth while registering sales of 83,220 units, a 49% y-o-y growth between July and September 2022 as compared to 55,910 units sold in the corresponding period last year (CPLY). For instance, the country’s commercial capital, Mumbai, has registered 8,628 property transactions during the month, up 11% from a year ago, while the exchequer has fetched 39% higher revenue worth INR 734 crore through stamp duty collections, showed data from the inspector general of registration, Maharashtra.
2. Healthy demand in infrastructure and construction: Infrastructure and construction account for 60% of domestic steel demand in India. The government is expecting another 3 million tonnes of steel demand in FY23 on account of the INR 10 lakh crore infrastructure push. For instance, as of 22 August, 2022, 122.69 lakh houses have been sanctioned, 103.01 lakh houses have been grounded, and 62.21 lakh houses have been completed, under the Pradhan Mantri Awas Yojna scheme (PMAY-Urban).
3. Low inventories amid maintenance: At present, cumulative inventories with mills are almost two times lower compared to the previous month, a source from a leading mill informed SteelMint. “We do not have any stocks in our yards as we had maintenance plans. Sales have been healthy in September,” he further added. Hence, lower inventories and mismatch between supply and demand will further lent support to the price hike.
4. IF-route rebar prices stay supported: Steel mills have duly noted that prices of induction furnace (IF) route rebar, which enjoys 60-70% of the market, have also been supported. SteelMint’s monthly average trade level price of IF-route rebars stood at INR 54,800/t ($672/t) in September, which has moved up by INR 700/t ($9/t) to INR 55,500/t ($680/t) as on 4 October.
Moreover, the gap between IF versus BF-route rebars prices have contracted to INR 500-1,000/t ($6-12/t) in different markets, which is redirecting the end-consumers to shift buying preference towards BF-route rebars.
Will the rebar price trend remain strong in Oct’22?
Robust home sales momentum continued for September 2022 solidifying the growth trend even though 15 days of last month were ‘Shraadh’ apart from the headwinds like rising interest rates. The fresh 50 bps rise in repo, taking total hikes to 190 bps, have further hit affordability in the market. But expectation of positive sales for some more time, including the festive season, remains strong. This will keep rebars prices strong in October, 2022.
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