- Steel composite index drops to 12-week low
- Flats see sharper fall but longs a little more resilient
- Project buying limps back, prices to remain stable
Morning Brief: The market dullness seems to be extending for more than a month since mills had opted for a price hike in late September-early October, sensing a demand optimism. Consequently, the India Steel Composite Index dropped to a 12-week low for the week ending 4 November, 2022. The index lost 1.5% to close at 149.7 points (151.90 points in the previous week).
The longs index edged down 0.83% to end at 149.40 (150.70) points but flats lost a steeper 1.45% to slide to 149.70 (151.90) points.
Factors keeping the index down
The market sentiments that have been reigning over many weeks are showing a resilience because of the globally inter-connected nature of the steel sector.
Flats more under pressure
1. Primary mills roll over list prices: Flats prices showed a sharper drop because the larger mills decided to roll over their list prices for November sales. As a result, most hot rolled coil (HRC) prices continued to remain at INR 57,000-58,000/tonne (t) while cold rolled coils (CRCs) were also static at INR 64,100-66,500/t. Likewise, list prices of galvanized pipes (GP) remained flat at INR 67,500-68,800/t and pre-painted galvanized iron (PPGI) at INR 79,500-80,000/t.
Trade-level prices came under pressure too. Benchmark HRC prices dipped by INR 200/t to INR 56,000-56,500/t but CRCs lost a steeper INR 1,700/t w-o-w to touch INR 63,000-64,000/t as per SteelMint’s 2 November assessment.
Prices were rolled over/dropped due to resistance to the early October price hike, rise in supplies –as mills returned from maintenance shutdowns — and slow overseas trade.
2. Are imports spooking mills? It seems mills are also under pressure because of imports. Some parcels of Japanese HRCs are expected to land on the east coast of India this month. Import prices, even after traders’ margins of a ballpark INR 3,000/t, are working out cheaper at say INR 54,000/t. On the other hand, domestic mill prices at ruling higher, as already mentioned above.
On the other hand, exports are almost stalled, thanks to the 15% duty slapped since end-May, 2022, taking a chunk of sales off the radar for mills. However, one primary mill source observed that, “Given the current global geo-political situation and demand scenario, even if there was no export duty, mills would not have been able to export much.”
3. Global sentiments influence markets: The overall global steel buying sentiments are down although India is the only bright spot at present. However, inflation and a sliding rupee are keeping buying trends subdued, especially with the rupee intermittently hitting a record 83 against the dollar.
Longs fall negligibly
a. Project demand rebound: Longs prices showed a slight resilience as infrastructure projects return to procuring. The rebound is a function of the downtrend in prices seen over the past few weeks. Some pent-up, post-monsoon demand is coming to the fore. Project contractors’ order books are showing a healthy growth, offering manufacturers some optimism.
b. Northern India construction ban: On the other hand, northern India is experiencing construction stoppage as the administration cracks down on the winter pollution spike. A recent order of the Commission for Air Quality Management in National Capital Region and Adjoining Areas, has banned construction activity relating to projects, including roads, except those exempted. These include earthworks, demolitions, structural constructions etc. This move is weighing on longs prices in the north, especially the Delhi, Faridabad and Ludhiana markets.
Outlook
A rebound in buying is expected across the country as the third (October-December) and fourth (January-March) quarters are traditionally the best in terms of demand.
Therefore, there are expectations of a slight upturn in prices – say, by INR 500-1,000/t — when mills sense the opportunity. However, even if prices do not rise, they will likely remain stable in the short to medium term.
The India Steel Composite Index
The India Steel Composite Index is assessed on a weekly basis: every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.
SteelMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, SteelMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India. For details click to view the methodology document.
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