February saw Indian semi, finished and raw material prices spurting m-o-m, goaded by supply and geo-political issues. SteelMint goes behind the uptrend.
- Coal: The bi-weekly index tracking the average portside ex-Gangavaram prices of the South African RB2 5500 NAR rose a sharp 23% m-o-m in Feb’22 to INR 15,980/t against INR 12,980/t in Jan’21. Although the prices remained range-bound in the first 2-3 weeks of February, amid limited stocks and dwindling interest from sponge iron mills — a key consuming segment, an upward trend was noticed in the latter part of the month with the outbreak of the Russia-Ukraine war. Prices surged with supply to the EU — Russia and Ukraine’s largest consumers of this fuel — facing major disruptions. RB2 portside prices surged INR 1,200/t w-o-w amid escalated South African prices.
SteelMint could not track the domestic G9 grade (4750 k/cal) prices at South Eastern Coalfields (SECL) since no auction took place amid supply tightness in the domestic market. Strong restocking demand from the power sector compelled CIL to reduce offerings in auctions. Notably, the offered volume was down 63% m-o-m to 6.34 mnt in Feb’22 compared to 16.98 mnt in Jan’22.
- Ferro alloys: Prices of the bi-weekly 60:14 grade silico manganese index emerging out of Raipur dipped 1% m-o-m to INR 98,870/t in Feb’22 against INR 100,220/t in Jan’21.
The marginal downtrend stemmed from the buyers’ unwillingness to buy at the previous month’s sharply high price levels. Later, however, producers experienced selling pressure as domestic demand was slightly muted with secondary semi-finished and rebar prices showing an uptick from rising raw material prices. Consequently, domestic demand for ferro silicon was subdued.
- Coking coal: Prices of the Australian HCC were up 9% m-o-m in February to $470/t against Jan’22’s $430/t. Prices initially remained range-bound but surged $18/t in the last week of February with the outbreak of the Russia-Ukraine war. Russia exports coking coal to EU, South Korea, Japan and Ukraine. With the Western countries slapping sanctions on Russia, these importing countries will now have to rely heavily on Australian material which is fuelling the price rise. Weather-related challenges Down Under are also impacting supply.
- Scraps and metallics: All showed an uptrend ranging from 4-10%, influenced by heated imported coal and semis prices. The pellet-based P-DRI, ex-Raipur, increased 7% to INR 34, 800/t in Feb’22 (compared to INR 32, 550/t in Jan’21) riding the escalated RB2 prices from South Africa while domestic supply from Coal India remained constrained.
Pig iron prices gained 10% m-o-m to INR 47,350/t (INR 43,010/t) in the month under review on rising coking coal and met coke prices. Coke is used as a reductant in blast furnaces and is derived from coking coal. Thus, pig iron’s price movements are highly dependent on both inputs. In fact, domestic pig iron prices had hit a three-month high of INR 45,800-46,000/t in end-Jan’22, impelled by rising input costs.
Domestic scrap (ex-Mumbai) edged up 4% to INR 38,580/t in Feb’22 against INR 37,130/t in the previous month, propelled by a few factors. The higher sponge and semi-finished prices acted as catalysts. Semi and finished long prices remained firm throughout the month, supporting the scrap uptick. Semi-finished prices rose by INR 200-3,000/t towards February-end, while rebar prices were up INR 1,300-3,000/t.
- Steel: This segment, comprising semi- and finished, saw an uptrend of 4-12%. The ex-Raipur billet index gained 6% m-o-m on higher coal and other input material prices.
The ex-Mumbai BF-grade increased 12% to INR 62,000/t (INR 55,430/t), and IF grade by 8% to INR 56,750/t (INR 52,380/t). Wire rods (ex-Durgapur) rose 6% to INR 52,160/t (INR 49,380/t).
The rising raw material costs impelled mills to raise prices. The gas shortage in Europe opened up export prospects for billets to mills in the Continent which will support the raised longs prices.
Ex-Mumbai trade level HRC prices gained 4% to touch INR 66,320/t (INR 64,020/t) m-o-m.
Although domestic demand for flats was need-based, exports gained momentum in February especially since the natural gas crunch and high prices continue to plague EU mills.
- Iron ore: This raw material, in terms of fines, lumps and the high-grade 63% pellets, rose 9-17% m-o-m in Feb’22. Fe63% fines from Odisha shot up 17% to INR 6,240/t (INR 5,340/t) while the Fe63% lumps (Odisha) upped 16% to INR 10,000/t (INR 8,610/t). Fe63% pellets (DAP Raipur) gained 9% m-o-m to INR 12,420/t (INR 11,380/t).
Prices were boosted by certain factors. Supply from Odisha was constrained due to limited availability of high grade fines and lumps as well as rakes. Offers from the merchant producers were restrained too. Earlier in February, global iron ore prices had upped on hopes that China would come back big-time into the market post-Lunar holidays.
Meanwhile, pellet prices resumed an uptick since Dec’21 but showed mixed trends as the market awaited clarity. EU demand for prompt cargoes has risen in the wake of the Russia-Ukraine war which will boost prices, going forward.
Outlook
The current Russia-Ukraine conflict will have wide-ranging ramifications on commodity trading. Being the EU’s largest supplier of steel and related raw materials, Russian supplies may be disrupted, goading the former to source from alternative destinations. Natural gas prices will pressure coal and steel prices upward too. Resultantly, raw materials will most likely stay heated in March too.
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