- Prices drop further by up to INR 2,000/t
- Lower raw material costs drag down rates
- Approaching festive season to keep demand, prices subdued
Indian tier 1 mills reduced their list prices by INR 1,500-2,000/tonne across benchmark hot rolled (HR) and cold rolled (CR) products for early September, 2022 sales, as per information available to SteelMint.
Prices of hot rolled coils (IS 2062, 2.5-8mm) now stand at INR 56,500-57,000/t. Cold rolled coils (IS513 Gr O, 0.9mm) are at INR 63,500-65,000/t. The prices exclude the 18% GST.
Why are prices still sliding down?
Prices have been on a downward trajectory since mid-April and are scraping almost the bottom of the barrel. Several factors, especially lower raw material costs, are contributing to the sustained downtrend.
Export tax impact: The sudden imposition of the 15% export tax in May made overseas sales highly unviable. Export prices had peaked at the fag-end of March and in April, ruling at $1010/t levels FOB east coast. But dropped off by around $100/t from their peak levels in April. Now, these are hovering at a little above $580/t, amid the tax impact and poor demand signals from Europe.
Mixed trend in global steel prices: Steel prices climbed to record high levels in Q1, but subsequently cooled off. Prices had risen mainly on account of supply disruptions post- Russia-Ukraine war, and panic buying by the European Union. However, as Europe stocked up, demand started receding. Recessionary pressures across the globe on the back of record high energy and gas prices also did not support demand. China’s production cuts amid demand drop and Covid surge forced mills to export at highly competitive prices. As a result, prices started declining. In India too, prices dropped amid lacklustre home and export demand and influenced sustained drop in list prices.
Coking coal price movements: Average monthly spot prices of the Australian Premium HCC (FOB) east coast India, after hitting their record high levels of $590/t in March, 2022 (after the onset of the Russia-Ukraine war on 24 February, 2022), hovered at $476-506/t levels over April-May. However, average prices lost 36% in July to $260/t against June’s $400/t. Thus, low coking coal prices do not support a hike in flat prices.
Iron ore prices dampen: Iron ore prices are dampening, pushing down finished prices. SteelMint’s weekly Odisha iron ore fines index (Fe62%) remained flat w-o-w on 27 August, 2022 at INR 3,400/t ex-mines. No deals were reported last week amid tepid buying interest.
The pellet index meanwhile dropped by INR 300/t to INR 8,400/t compared to 23 August, again on lack of buying interest.
Prices have dropped amid a sharp decline in exports while the ongoing monsoon has further dampened demand, making miners hold on to their offers.
Outlook
The first fortnight of September is likely to see an uptick in demand as the monsoon recedes. But, subsequently, India’s festive season will take over which will slow down market activities — a factor that will not support any uptick in prices in the short to medium term.
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