- Mills take third price hike in Jan
- Global domestic, exports offers stay firm
- Steel prices may rise further as China returns from holidays
Morning Brief: The India Steel Composite Index inched up again to close at a five-month high of 155.60 points (154.80 points in the previous week) for the week ended 27 January, 2023. This level was last seen on 5 August, 2022. Although the absolute increase was a marginal 0.5% w-o-w, the important pointer is, the index has sustained an uptrend for six weeks in a row.
The flats index rose a more substantial 2% to 153.70 (150.70 ). Longs, on the other hand, inched down by 0.80% to 158.60 (157.40) points w-o-w.
Factors sustaining the uptrend
1. Mills raise prices in quick succession: Mills took a third hike this month, for end-January sales.
Flats prices increased by INR 750/tonne on the back of an INR 1,250/t ($15/t) hike seen for mid-January sales. Similarly, BF-grade rebar also took an increase of around INR 1,000/t even after a raise of INR 1,500/t ($18/t) in the previous week. Domestic trade prices moved up accordingly.
2. Global markets lend support: Although markets remained quiet during the Lunar holidays week, domestic HRC prices globally had risen in the preceding week. In Asia, Vietnam and South Korean mills had announced hikes. In addition, China’s Baosteel, world’s leading steelmaker, had also raised monthly HRCs prices by RMB 100/t ($15/t) twice in a row in a single month. In the US, prices rose to $785/t, about $15/t higher than that seen in early January.
The price increases were supported by an overall bullish demand trend.
3. Indian export index up $50/t: India’s HRC export index this week upped by almost $50/t to $680/t FoB east coast. In fact, the index is hovering at a 7-month high, riding demand revival in Europe. A week, Indian mills became very active in exploring deals, underscoring the fact that the lull pervading the market for the last 7-8 months has dissipated.
4. Global exports offers up: Global exports offers have risen thanks to the demand pull and are supporting Indian domestic and export prices. FoB prices in China, Japan, Korea and India, the countries which together enjoy around 45% of the seaborne trade, are all nudging levels last seen in July 2022.
A week ago, Japan’s Nippon Steel too raised its HRC export offers by $50/t to $650/t FOB for early March shipments.
5. Raw material prices rise: Increasing prices of raw materials have lent support to the firming prices. NMDC, as recently as on 28 January, hiked iron ore prices by INR 500/t. The Odisha iron ore fines index and domestic pellet offers are also up, supporting NMDC’s hike. Global benchmark Fe62% fines prices have risen $11/t m-o-m to $127/t.
Coking coal prices too have been increasing steadily. Imported Paradip CNF prices are up at $345/t from $330/t a week ago. Premium HCC prices from Australia have risen from $287/t a month back to $332/t FOB Hay Point.
Raised raw material prices are increasing the cost of production for mills and also creating a case for firmer prices.
Sponge iron prices correct, impact longs
But having said that, longs prices, in particular, inched down this week essentially due to a downward correction in sponge iron prices amid sluggish demand. However, prices in Odisha rose by INR 100/t as sponge units in the state had been told to temporarily stall production for environmental reasons during the Hockey World Cup held over 13-29 January. But, with normal production schedules resuming in Odisha, prices may correct further.
Outlook
The SteelMint Composite index is expected to move up further as mills eye price hike for early February sales as well.
Moreover, China is back in the market after the Lunar New Year holidays and the buzz is that offers from this country will rise middle of next week. This will further prop up Indian domestic and export offers.
India’s rebar-HRC spread rose to a three-year high last month. This may normalise soon since flats prices, traditionally higher than longs, may increase further.
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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