- Steel composite index dips negligibly w-o-w
- Slow domestic and global demand impacts flats
- Subdued infra, housing demand keep longs down
Morning Brief: The India Steel Composite Index remained range-bound for the week ending 11 November, 2022. It dipped further by a negligible 0.9% to close at 148.40 points (149.7 points in the previous week).
The longs index edged down 1.18% to 148.20 (150.00) points and flats dipped 0.57% to 148.50 (149.40) points w-o-w.
What factors are keeping prices range-bound?
Post-festive demand flat for flats
1. Trade-level, mill prices a damp squib: The market silence seems to be extending since the last many weeks and has not been broken even after the festivities.
Thus, trade-level prices of Indian hot rolled coils (HRCs) continued to decline in most markets last week except Mumbai. Slow domestic trade, weaker global signals and the bothersome issue of negligible exports ever since the 15% levy in end-May 2022 are keeping the flats segment down.
Prices of SteelMint’s benchmark HRCs for the trade segment stood unchanged at INR 56,000-56,500/t. CRCs dropped marginally by INR 200/t to INR 63,000-64,000/t. Prices are exy-Mumbai, excluding 18% GST.
In the previous week, primary mills had rolled over their early October list prices of flat steel for November. Post-revision HRC list prices continue to hover at around INR 57,000-58,500t/ while those of cold rolled coils (CRCs) are at INR 65,000-66,800/t exy-Mumbai, excluding GST @ 18%.
2. Lack of exports a worry: The export levy was implemented to curb inflationary trends and has almost stalled exports. SteelMint India’s benchmark export index has fallen by 51% to the current $518/t FOB east coast India from the peak of $1,065/t FOB seen in end-March 2022. In fact, Indian HRC export indications to traditional markets like Vietnam and UAE have dropped steeply this week, pulling the index to a 2-year low.
Flats comprised around 70% of Indian steel exports which have almost 20% share in India’s total steel production. Therefore, subdued export signals are impacting flats prices majorly.
3. Imports a bother? Although imports are not influencing prices yet, HRC volumes have made some headway since August-September, 2022. Some parcels from Japan are slated to arrive in India by November-end for an eastern region buyer. SteelMint also heard of some more Japanese HRC cargo getting booked at $590/t CFR India. Last week, another 40,000 tonnes of HRCs were booked from Japan at $550-580/t CFR levels. However, these deals could not be confirmed till the time of publishing the article. Mills can take comfort from the fact that the import parcels are small.
Longs subdued amid low infra, housing demand
i. Project sales prices rolled over: Indian primary mills kept their monthly contract prices for project sales unchanged for November, SteelMint learnt. As a result, offers stand at INR 56,500/t ($699/t) FOR Mumbai. However, the on-ground scenario indicates that prices have softened m-o-m depending on mill and buyer. Inflationary pressures are keeping buying limited.
Demand crisis in the global longs market has also negatively impacted sentiments in India.
ii. IF-route rebar prices decline: Tepid demand led to a decline in IF-grade rebar prices and some inventory pile-up. This segment enjoys 60-70% of India’s longs market. SteelMint’s benchmark IF-route rebar prices stood at INR 53,500/t ($662/t) exw-Mumbai as on 11 November against INR 56,000/t ($693/t) levels seen in mid-October.
iii. Moderate housing demand in Oct: Reduced prices of longs have also been fuelled by a tepid housing sector demand. Registration of properties in the Mumbai municipal region, India’s biggest housing market, stood at 8,276 units in October, down 3% from the year-ago period.
iv. Northern India construction ban: Northern India is experiencing construction stoppage as the administration cracks down on winter pollution. A recent order of the Commission for Air Quality Management in National Capital Region and Adjoining Areas, has banned construction and demolition activities. This move is weighing on longs prices in the north.
Outlook
Prices may be under some pressure if the expected demand rebound is further delayed. Mills will remain focused on the domestic market amid almost stalled exports.
The construction season will last till the advent of monsoon next year and so the mills have enough time to see a demand recovery and many are expecting a healthy sales upturn in Q4 as projects near completion deadlines.
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.
Leave a Reply