Chinese steel futures continued to drop even as government continued to repeat warnings to stockists and speculators on rising commodity prices. Chinese government held a meeting with several associations to raise their concern on rising prices which as a result is likely to create inflationary pressures.
The impact of this was clearly seen on futures and spot market. Futures market corrected by over 4% yesterday with spot billet prices falling over $36/t during the day’s trade. The most active contracts of Rebar and HRC futures at Shanghai Futures Exchange (SHFE) have corrected by over $180/t since the first week of May.
Indian steel prices have also closely followed these global trends and are accordingly showing a downward trend. Spot steel prices corrected by over INR 1,200/t yesterday. SteelMint’s benchmark billet index currently stands at INR 41,400/t exw Raipur (down by INR 500/t).
Most of the Indian states are still under complete or partial lockdown which appears likely to get extended till mid of June. Indian steel consumption has also witnessed a fall of 23% in April and this drop could be higher still in May.
At current price levels, most of the sponge iron units have started making losses. Impact has clearly been seen on pellet prices (60% of India’s coal based sponge is produced using pellets), which corrected by about INR 1,000/t. If the situation persists, iron ore prices are also likely to come under pressure.
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