- Parity between imports, domestic prices positive for market
- Key mills raise construction steel prices
- Steel raw materials market upbeat on increased buying
Morning Brief: SteelMint’s India Steel Composite Index, a bellwether of the domestic steel market, edged up marginally by 0.5% w-o-w to 145.8 points this week. The domestic flat steel and long steel indices constitute the Composite Index: while the former rose by 0.7% on the week to 142.6 points, the latter witnessed a slower growth of 0.3% to 148.9 points.
Factors pushing index higher
1. Domestic prices & imports at par: Parity has been achieved between domestic steel prices and the landed cost of imports with global sentiments witnessing a recovery of late due largely to the prospect of China easing pandemic norms and opening up as well as slight taming of inflation and energy prices. Mills around the globe have been slowly lifting steel prices in anticipation of improvement in demand. While China’s HRC exports prices have edged up, major Vietnamese and European producers have increased domestic prices. Of late, the downward pressure on the domestic steel market had been due to the increased inflow of imports. Prices in the trade segment had been under pressure because of imports that had already landed well as cargoes in transit. Now that import prices are no longer at a discount, it seems domestic steel prices have room for improvement.
2. Tier-1 mills raise long steel prices: Leading domestic mills last week increased list prices of construction steel rebar and wire rods. JSPL increased rebar prices by INR 1,000/t ($12/t) for end-December sales. Likewise, SAIL raised its list prices of rebar by INR 500/t ($6/t) on Saturday last, while ESL increased list prices of rebar by INR 1,500/t ($18/t) and wire rods by INR 2,000/t ($24/t) owing to strong order bookings and cost push, SteelMint reported. The India Rebar Index, as part of the Composite Index, has edged up by 0.3% w-o-w. Moreover, it is expected that Q4 of the ongoing fiscal may see further improvement in long steel prices as the last quarter is usually positive for the construction market. Government infrastructure and construction projects usually gather steam during the last quarter as they need to adhere to completion timelines before the end of the financial year.
3. Prices rise in OMC’s iron ore auction: At Odisha Mining Corporation’s iron ore fines auction on 16 December, 1.11 million tonnes (mnt), or as much as 97% of the total quantity on offer, received bids. The bid price for fines increased by up to INR 400/t against the last auction on 16 November. Tight availability of high-grade ore, lower inventories at mills and the uptick in pellet offers in eastern India resulted in the auction receiving active response. Further, export activities for low-grade fines have picked up since the 50% tariff on iron ore exports was lifted on 19 November last. With China reopening hopes alongside the possible uptick in iron ore and pellet exports, domestic steel raw materials prices may remain supported and, in turn, further support steel prices.
4. Sponge production in Odisha to get impacted: The Odisha State Pollution Control Board has issued a notification mandating closure of all sponge iron plants in Rourkela from 1 January to 31 January with the aim of maintaining air quality during the upcoming Hockey World Cup to be held in the state. Industries and services culpable of coal-based emissions have been mandated to either stop or restrict operations. Rourkela is a key sponge iron market and this announcement naturally led to increased buying before prices started spiralling, which resulted in a rise in prices. As all the DRI units in Kuarmunda and Kalunga down shutters in January, supply tightness is expected to keep steel prices strong.
5. Domestic mills test buyers with higher export offers: SteelMint’s India HRC (SAE1006) export index has risen to a five-month high and mills quoted higher offers to traditional buyers in the Middle East, Vietnam and Europe as global HRC trade prices rose. However, a few Indian mills were heard to have withdrawn export offers post the rise in global prices and are unlikely to resume offers during the Christmas/New Year holidays. It is widely anticipated that mills might return to the export market with higher offers post the New Year holidays, with a simultaneous increase in domestic prices for January sales.
Outlook
Amid the overall optimism, one key downside still remains – surging Covid cases in China and the rising rate of infections in Japan, South Korea and elsewhere. This black swan event that turned global markets upside down in 2020 is still a cause for serious concern. Delay in China’s reopening could further hamper steel demand and prices and dampen sentiments in an industry with a high rate of global exposure.
India Steel Composite Index
The India Steel Composite Index is assessed on a weekly basis: every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.
SteelMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the EAF-IF routes. Keeping this broad classification in view, SteelMint releases the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India. For details click to view the methodology document.
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