India: Rebar inventories pile up, short-term price adjustment likely

Rebar inventories are piling up across primary and secondary steel mills in India. Trading sources revealed to SteelMint that in the last one week alone overall trade volumes have been quite low.

“Inventories are accumulating because of low domestic demand. Although the number of Covid cases has declined, the demand is yet to pick up to normal levels, it seems,” said a trade source.

“Mills have started accumulating inventory, for sure, especially the secondary ones. In case of primary mills, some of them are resorting to export deals to offload some stocks which is giving them a breather,” said another source.

The inventory build-up has also resulted in some corrections in prices. SteelMint’s rebar prices fell by INR 400/t d-o-d to INR 46,200/t ex-Raipur.

Recent deals

Sources reveal that, as recently as last week, around 80,000-100,000t of rebar were on offer from two leading primary mills for export. Of this, one cargo has been booked while another is still under discussion.

In the meanwhile, a large rolling mill in central India has been heard offering billets in the domestic merchant market. Since rebars are not selling, the mill was keen to offload the material at the semi-finished i.e. billets stage itself.

Price impact

Consequently, it is expected that secondary mills may cut domestic prices in rebar in the short to medium term to revive sales and while the primary mills are opting for the export route, the secondary mills may need to curtail production or cut prices in the domestic market, in case inventories keep piling up and demand does not look up. The production cut may lead to price stabilisation.

The downside, however, is the monsoon which curbs the sale of long products, due to halt in construction activities during this time.

Outlook

Notwithstanding the market conditions as above, a very sharp correction in rebar prices is not expected since there is expectation that pent-up demand would get released from the end of June with the Covid-induced lockdowns likely to ease in many states by then.

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Prices as on 8:50 IST, 15th June. d-o-d changes indicated against closing price of 11th June