Indian primary mills have increased their monthly contract rebar prices for the projects segment for January 2023 sales, SteelMint learnt from sources. Subsequent to revision, effective prices are hovering at around INR 59,000-60,000/t ($722-734/t) FOR Mumbai.
Factors behind increase in prices:
1. Increase in raw material prices: Prices of steel-making raw materials have been on the rise. SteelMint’s iron ore fines Odisha Index (0-10 mm, Fe62%) increased on a monthly basis to an average of INR 4,420/t ($54/t) in December against INR 3,550/t ($43/t) a month ago. Furthermore, the largest merchant iron ore mining company, NMDC, announced a hike in iron ore prices by up to INR 600/t ($7/t). Prices of lump ore were raised by INR 500-600/t ($6-7/t) and fines by INR 500/t ($6/t), effective from 1 January.
Coking coal prices have also risen in January to $312/t CFR India levels from $277/t in December.
2. Strong demand from infra and construction: Property registrations in India’s largest real estate market, Mumbai have increased by 9% on the year to 1.22 lakh units on the back of strong demand and economic growth. A point to note here is that registrations in 2022 were the highest in the last 10 years.
In addition to the above, the Ministry of Port, Shipping and Waterways (MoPSW) has identified 101 projects worth INR 56,831 crore under the PM Gati Shakti Master Plan, which have to be implemented by 2024. Out of these, 13 projects worth INR 4,423 crore have been completed and 9 projects worth INR 716 crore are expected to be completed by March 2023. Hence, demand is likely to remain strong in entire Q4FY’23 as the infrastructure and construction sector comprises around 60% of overall steel demand.
3. IF-route rebars stay supported: The disruption in sponge iron production in Odisha due to the World Cup Hockey Tournament has led to an increase in prices of sponge iron and semi-finished products like billets. As a result, higher cost of production for induction furnace (IF) rebar manufacturers has lent support to trade-level prices. For instance, IF-route rebar trade prices’ weekly average stood at around INR 56,500/t ($691/t) exw-Mumbai during first week of January as against INR 54,700/t ($669/t) exw-Mumbai seen in the last week of December. It is to be noted that IF rebar enjoys 65-70% of market share in India.
Outlook
Prices are likely to remain supported during the current quarter on the back of healthy demand from the projects segment. Being the last quarter, deadlines for project completion are nearing ahead of the ongoing financial year closure.
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