Nepal: Rebar offers rally to six-month high on cost push, output curbs

Steel mills in Nepal have raised rebar offers this week by NPR 2,500/t ($20). Current prices of rebar (12mm) are at around NPR 94,000-95,000/t ($722-730/t) exw, excluding VAT. Offers have hit a six-month high as similar levels were last seen in July 2022, according to data maintained with SteelMint.

Factors driving up rebar offers

1. Costlier imports – Fresh offers of IF-route billets from India stand at $600-610/t CPT Nepal, up $15/t w-o-w. BF-route billet offers from India are at $590/t ex-mill (equivalent to $610/t CPT Nepal), up $10-15/t w-o-w. Following a hike in prices in the domestic and global markets, Indian mills have limited allocations for HRC exports to Nepal for end Febuary-early March shipments. Also, sponge iron import prices for Nepal have risen by $5/t w-o-w. In a recent deal, 2,300 t of P-DRI (80% FeM) was sold at around $395/t ex-mill ($415/t CPT Raxaul border) from eastern India. In another deal, 2,500 t of C-DRI (79% FeM, 70:30) was booked at $440-445/t CPT Raxaul border.
2. Lower steel capacity utilisation on power cuts – As power generation from the run-of-river-based powerhouses reduced due to the drop in water levels of the rivers during the dry season, the Nepal Electricity Authority imposed power cuts for industrial use during the morning and evening hours. Market participants reported lower steel capacity utilisation this week, which may continue for at least for a month. This is likely to keep rebar offers supported in the near term.
3. Exchange rate fluctuations – The NPR has gained against the USD this week and is trading at 130.1 against 132 a week ago.

Market participants expect that there are fewer chances of a drop in steel prices in Q1CY23, considering the fact that it is traditionally a strong quarter for demand and power curbs in Nepal may keep output restricted.

With steel demand of roughly 2.5 mnt per annum, Nepal has been focusing a lot on the construction sector. The country’s construction sector is said to contribute around 10-11% to its GDP. In addition, Nepal imports nearly 1-1.5 mnt of semi-finished steel and 1 mnt of finished steel annually (both flats and longs), with India being the largest supplier with a share of 95% of total imports.

2nd Nepal Trade Summit
To gain a deeper insight into the changing dynamics of Nepal’s steel industry, book your seat at the 2nd Nepal Trade Summit to be organised by SteelMint Events on 1-2 March, 2023.