Six Reasons Why Indian Steel Prices May Fall

Indian steel prices have been rising for the last few months due to various factors like protective measures by government, rising steel exports, falling imports and improved global steel demand.

On an average steel prices (HRC) have increased by about INR 1,500-2,000/MT (USD 23-31/MT) in last one month and INR 3,000/MT (USD 46/MT) in last one year.

However, the trend shows that prices may not sustain for a long period and market may see some corrections in coming months. Below are the factors that we feel may put pressure on prices.

1. Falling global flat steel prices: Steel prices in global market, especially China, have shown correction owing to oversupply, rising inventories with steel traders and the bearish sentiments in Chinese domestic market. Chinese HRC export offers stand corrected by almost USD 60/MT in last one month and it is anticipated that it may not recover soon to previous levels.

2. Lowering Export orders with Indian steel makers: India has reported a sharp rise in steel exports in the month of March. As per government data, India’s finished steel exports have grown two fold M-o-M and are recorded at 1.62 MnT in Mar’17 against 0.75 MnT in Feb’17. However the exports are estimated to fall in the month of April and May as not many bookings were reported by exporters.

3. Increased steel exports from China: However, on monthly basis, China’s steel exports have surged by whopping 31.4% in Mar’17 against previous month. In Feb’17 China’s steel exports stood at 5.75 MnT. Lower Chinese HRC export offers continues to attract buyers in South East Asian markets.

4. Increased Indian crude steel production: With sharp increase in crude steel output of major Indian steel makers, the productions have touched 97.4 MnT in FY17 against 89.8 MnT in FY16. Major Indian steel makers have registered significant increase in their crude steel output in FY17. JSW Steel’s crude steel output moved up by 26% Y-o-Y from 12.56 MnT in FY16 to 15.8 MnT in FY17. Tata Steel achieved crude steel output of 11.67 MnT in FY17 up by 17% Y-o-Y.

5. Appreciation in Rupee Value: Increased investments coming in from Foreign Institutional Investors (FII’s) has resulted in INR appreciation against dollar. Presently INR is trading at 64.52 against USD. A month back traded at 66.18 against USD.

6. Rising imports of iron ore and scrap:  Falling global iron ore prices has increased enquiries from iron ore importers. Spot iron ore prices in China have dipped by USD 13/MT W-o-W over decline in iron & steel futures. Iron ore import vessels have been booked for May deliveries.

Indian scrap importers have also recently booked 4-5 bulk scrap vessels from US for May-Jun deliveries. HMS (80:20) Europe prices are currently assessed at USD 290/MT, CNF India against USD 300/MT, CNF India a month back.

Indian HRC Prices incl ED,VAT extra
Prices are Per tonne basis
Source-SteelMint Research