- Trade market prices of HRC drop by INR 1,700/t w-o-w
- Slow buying interest in both domestic and overseas markets
- Mills might go for maintenance shutdowns
The domestic trade market prices of hot-rolled coils (HRC) and cold-rolled coils (CRC) continued to move southward. Bearish sentiments and low buying interest in both domestic and global HRC markets are weighing on the trade volumes on both platforms.
SteelMint’s benchmark price assessment for HRC stood at INR 61,000-62,000/t ($781-794/t), down by INR 1,700/t ($23/t) w-o-w, while CRC prices fell by INR 2,500/t ($32/t) to INR 69,000-70,000/t ($884-896/t). Prices are on an exy-Mumbai basis, and exclusive of GST at 18%.
Exports slow down; mills might opt for maintainance shutdowns
The imposition of the 15% export duty on clad or plated non-alloyed steel has slowed down exports of HRCs from the country. SteelMint’s India HRC (SAE1006) export index dipped further to $723/t FOB east coast from the previous week’s assessment of $730/t FOB. This was the second consecutive decline as the mills resumed offering alloyed HRCs for exports after a brief gap of two weeks since the announcement of the duty on 21 May.
A deal involving 15,000 t of alloyed (boron-added) HRCs was heard concluded at $740-745/t CFR Vietnam for delivery in July. The deal was sealed a week back and was included in the index valuation for the current week.
Moreover, Indian-origin boron-added HRCs are being offered at $790-800/t CFR UAE, down from the previous week’s level of $800-810/t CFR. Buyers in the market have started bidding lower at $780-785/t CFR.
Adding to the mills’ concern, overseas buyers continue to remain on the sidelines, anticipating further reductions in offers from India and subsequently from other exporting countries as well. The demand in the traditional markets of UAE and Vietnam have been slow since the beginning of the year. While Vietnamese importers favoured domestic procurements since January 2022, the UAE-based buyers showed reduced interest since March amid continual decline in offers.
Thus, mills might opt for maintainance shutdowns to reduce the piling up of inventory amid limited buying interest on both domestic and global platforms. This will provide some support to declining exports as well as domestic market prices, said sources close to the mills.
Domestic demand recovering but pace remains slow
The Index of Industrial Production (IIP) for the manufacturing sector dropped by 8.8% m-o-m in April to 132.5 points, as per data released by the Ministry of Statistics and Programme Implementation (MoSPI).
This reflects the low demand in April which continued into the succeeding months. The stocking up of HRCs in end-February and early-March by end-user industrial buyers weighed on the demand, and thus prices, in April. The domestic market prices of HRCs had started their continual decent from the peak of INR 78,800/t ($1,009/t) exy-Mumbai as assessed on 6 April 2022, as per SteelMint records. However, the manufacturing IIP showed an increase of 6.3% y-o-y because of the low base effect amidst lockdown and diversion of oxygen for medical aids in April last year.
Another factor to look out for is the monsoon’s seasonal impact on the infrastructure and construction industries, which is likely to slow down activities.
On the other hand, unregulated industries such as fabrication and heavy machinery might show some demand.
Yet, the anticipation of further drop in prices might weigh on the volumes in the domestic trade market, SteelMint understands from the talks with market participants.
Meanwhile, depeletion of inventory accumulated earlier in February-March would push buyers to procure now. Mills were heard saying that domestic demand is resuming but slowly after a prolonged period of urgent need-based procurement.
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