Indian primary steel mills have raised prices for flat steel by INR 2,000-2,500/tonne (t) ($27-33/t) for Nov’21. The reason is surging prices of input materials like coking coal, met coke and ferro alloys, mills say.
Indeed, premium HCC Australian coking coal prices are up 257% in Oct’21 y-o-y while the HCC 64 mid-vol is up 214% in this period. Prices of both silico manganese (60-14) and ferro manganese (FC70%) are currently up around 30% since the third week of September.
It may be recalled flats prices had been raised in October by INR 1,500/t ($20/t) and longs by around INR 3,500/t ($47/t).
How sustainable is this price hike?
To what extent will the downstream market be able to absorb the latest hike, since demand – domestic and exports — both look dull at present?
- Exports subdued: Indian mills have hardly concluded any significant export bookings in the last three months while November looks bleak. The last four weeks show nil bookings. Steelmint data reveals sporadic HRC deals concluded since August and that too to not traditionally lucrative destinations like Vietnam or Europe but the UAE, Nepal, South Korea, along with a single deal to Vietnam in September. Volumes ranged from 15,000-65,000 t and prices from $850-960/t CFR levels. Exports comprise a substantial 30-35% of mills’ allocations and they cannot afford to ignore this market which offers solace when domestic demand is down.
- Low Chinese offers: A key reason for lack of buying interest from South East Asia lies in the steadily declining Chinese offers. “Chinese prices have come crashing. Yesterday, a prominent Chinese mill booked 30,000 t of HRCs into Vietnam at $840-850/t CFR. Because of this, Indian mills are perhaps losing their grip on the Vietnam market,” an export source said.
SteelMint data reveals that average weekly imported HRC offers to Vietnam from China have dropped from $985/t CFR in mid-August to $910/t CFR in the second week of October. In comparison, Indian offers to Vietnam had to be reduced from $928/t CFR levels in early August to $890/t levels in end-September although these inched up to $910/t CFR in second week of October.
Chinese HRC prices have dropped from RMB 6,000/t ($937/t) levels to around RMB 4,000-4,500/t ($625-703/t), a drop equivalent to around INR 18,000/t. “Finding buyers in South East Asia is tough at Indian price levels and this is a concern,” the source said.
- Europe prices under pressure: Quotas to Europe will open in Jan’22 but Vietnam, Indonesia, Malaysia and Japan are all looking to export to the continent. Europe prices will come under pressure now with too many competitors in the fray and demand not sharply up either. Auto production has been impacted by the semiconductor shortage. Moreover Europe is moving into winter which is not a high demand season.
- Domestic demand subdued: With exports down, will this additional material be absorbed in the domestic market? Stockists still need to liquidate inventory bought in early October at INR 65,000-66,000/t ($870-883/t) levels while current offers are nearer INR 71,000/t ($950/t). “Domestic market, demand sustained because of the retocking ahead of a further price hike. November does not look too rosy. There will be resistance,” said a market source.
“End-user demand is expected to be better than last year but demand is not that good at present,” said a trade participant.
Rebar and longs
Mills are also mulling a hike in rebar prices, by around INR 1,000/t, SteelMint overheard. However, they may watch the induction furnace (IF) players’ price movements (INR INR 54,000-55,000/t) intently first. However, the coal issue, which is a big price influencer for the IFs, is slowly being resolved. Global coal prices have dropped while domestic availability is increasing. BF-route rates are at around INR 60,000/t.
Outlook
But one may have to wait till mid-November — by when the existing trade-level inventory may get liquidated — to see whether stockists return to the market. Will they buy at current elevated rates? Will discounts be offered or prices be rolled over for December?
“India was exporting a good 20-odd mn t and if this drops mills will be under pressure to offload in the domestic market. So there may be a rollback,” predicted a source.
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