Domestic HRC prices unlikely to go below current levels after imposition of provisional safeguard duty.
Imposition of 20% provisional safeguard duty on hot rolled products announced on 14 Sept’15 by Indian government brought cheer in the Indian market.
With 20% safeguard duty, the landed cost of imports has become equal to domestic HRC prices, which ideally trades at a discount of INR 1500-2000/MT.
Import Parity Pricing (IPP)
IPP is defined as the price that a purchaser pays for imported goods which includes CNF import price, basic customs duty, countervailing duty (CVD) and transport cost to purchaser’s locations.
In the above graph, average prices of HRC (2 mm, CR quality) from China, Japan and Korea, and average USD rate on per month basis have been considered. Net landed cost (ex-Importer’s yard) and domestic prices (ex-Factory yard) of same quality have been calculated.
It can be observed that net landed cost of imports for the month of September is INR 28,200/MT (for which bookings were made in July); whereas, average domestic HRC price for September is INR 32,500/MT.
Thus, there is a huge gap of INR 4,300/MT between landed costs and domestic prices. The reason being prices of imported HRC fell down by 11% in the month of July in comparison with June.
Current offers of 2.5 mm HRC form China are being assessed in the range of USD 305-310/MT for cold rolling grade, CNF India basis. Whereas, domestic HRC is assessed at INR 32,500/MT (ex-Mumbai and ex-Chennai) and INR 33,000/MT (ex-Delhi). All prices include excise of 12.50%.
If today an importer books his order at current prices from China, it will land in India in November and its landed cost in Indian currency will be INR 32,900/MT.
It can be seen that landed costs of import for November shipments will be costlier as compared to current domestic prices.
Prices Stable Post Safeguard Duty
As per trade sources, domestic HRC prices have not observed any major changes post safeguard duty.
“Currently traders and dealers have enough stock of HRC and demand is still weak in the market. As such, there is little scope for domestic players to increase their prices by huge margins. However it is for sure that prices won’t go further below the current levels”, quoted a SAIL executive.
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