- Indian mills report lower sales in Jan
- 75,000 t re-bar reported booked for exports by large mill
- Export allocations may increase in March
Once again, the large steel mills’ spotlight is on exports. So much so that SteelMint has learnt from reliable sources, last week, Indian mills booked over 75,000 tonne of rebars for exports and more cargoes are under negotiation.
Interestingly, the price level was a bit low, at $580-590/tonne fob levels for March shipments, as compared to what was being offered in the domestic market. Mid-February BF-grade retail rebar prices (12-32 mm) are hovering around INR 49,000-50,000/tonne ($680) FoR Mumbai, excluding the 18% GST. The likely shipment destinations are Singapore and Hong Kong
Sources say that despite this lower export price, other major mills too are eying shipments and that there will be much to watch out for in March in this space.
Why the focus back on exports?
So what factors are exerting pressure on the primary mills, especially those who make long products like rebars and semis, to look at exports once again? The reasons are not far to seek.
One is that these larger players have reached almost 100% optimal capacity utilisation level. Steel is a commodity where operations cannot be stopped since a blast furnace stoppage involves cost aspects and technical complexities. In such circumstances, continuous production warrants continuous sales too. However, there has been a drop in domestic sales from December because the government sounded an alarm bell on rising steel prices, ticking off producers that prices need to decrease, even hinting at cartelisation.
January was a dull period for long products which particularly go into infra projects. In fact, sources at a large longs producer said that there was hardly any product movement in January as if on cue from the remarks of Nitin Gadkari, the Minister of Road Transport & Highways (MoRTH), that the price hike was “not justified”.
Consequently, SteelMint notes that, in a dull domestic market, at RINL, although production in January was above 5 lakh tonnes, sales dropped to over 40% to 2.72 lakh tonnes. JSPL’s sales dropped 18% m-o-m in January to 0.58 lakh tonnes over December, 2020’s 0.71 lakh tonnes. Production was also down from 0.73 lakh tonnes in December 2020 to 0.69 lakh tonnes in January, 2021.
However, at JSW Steel, January crude steel production at 1.43 million tonnes (mnt), was up a marginal 2% over December, 2020’s 1.41 mnt. Its longs production was m-o-m up 7% while flats output was down -3% m-o-m. But, JSW Steel has increased its exports plan for February, 2021 to around 1.80 lakh tonnes against the actual 1.55 lakh tonnes seen in January.
Boost to secondary mills
Secondly, the Centre recently released an important notification which will alleviate the conditions of the secondary producers but put more pressure on domestic prices. As per the new notification, the government has allowed the usage of steel produced by secondary steel manufacturers in the construction of highways. Earlier, in such projects, road developers were required to use steel produced by the primary producers. The decision has been taken in view of rising prices of the steel supplied by the primary mills.
These mills, on their part, have justified the rise, citing rise in prices of iron ore and internationally.
“We feel that more export allocations may come in the month of March. These will be either in the form of billets, rebars or wire rods. But, more importantly, most mills would be keen to resume exports because probably such high production volumes cannot be absorbed in the domestic market,” said a source. That apart, steel prices are following a downward curve in February and the home market may not be so lucrative immediately.
Price differential to narrow?
As a result of these recent developments, the price differential between primary and secondary mills will start narrowing, feel trade sources. As per SteelMint data, 12-25mm ex-Mumbai induction-based mills’ rebar prices have ranged from INR 36,150/tonne to INR 42,350/tonne from January, 2020 till date, whereas BF-grade prices ricocheted from INR 38,800 in January, 2020 to INR 51,100/tonne at present, after peaking at INR 54,450/tonne in January.
The average price differential was at a little above INR 5,000/tonne between secondary and primary mills. However, the monthly gap had widened to INR 8,300/tonne in December, 2020, INR 8,550/t in January, 2021 and to INR 8,750/t till February 16, 2021, because of the sharp rise in prices in the primary segment. It may be recalled primary segment prices had risen a whopping INR 8,400/tonne in December m-o-m.
But, trade circles now feel this gap will start narrowing since primary mills’ prices are showing a cool-off trend.
~Madhumita Mookerji
Leave a Reply