Indian steel (Sponge, Billet & Rebar in secondary market) prices have fallen by almost INR 3,000/MT (USD 40) in last couple of weeks owing to limited demand from the domestic & global buyers. Amid significant fall, the prices of Sponge iron & Billets in major markets currently stand close to 2-months low.
SteelMint’s latest assessment of induction grade billet stood at INR 33,500-33,700/MT (ex-Durgapur), equivalent to USD 454-457/MT on ex-mill basis, excluding 18% GST, against a price level of INR 36,800/MT (USD 537), two weeks ago.
Which all factors have pulled down prices ?
1. Low demand due to upcoming festive mood, which has forced stockiest & end users to postpone their purchases.
2. Increased sponge iron production by mid-sized mills, due to better logistics of raw materials and clear weather which in turn lead to better capacity utilization.
3. Weak demand from South East Nations. Also demand is not much healthy from the Nepal due to ongoing heavy rains, which in turn lessen productions of finished steel in the nation. Nepal is the largest buyer of Indian billet & Wire rod, contribution is about 40-50% from the total billet exports from India.
4. Competitive prices of Scrap & Billet in the global market. This has resulted limited billet export deals from India.
5. Falling domestic pellet prices & fewer export booking. India’s domestic pellet prices slump near about INR 500-800/MT in last 2 weeks on limited inquiries and lower export bookings. Chinese mills are on national holiday which ends on 07 Oct which has led to fall in export deals.
Factors which are likely to support prices –
1. Depreciated Indian currency, which may support exports and imports will remain expensive. Indian currency records low at 73.3 against US dollar.
2. Indian billet prices are close to export parity, any major fall in domestic prices will ease the scope of exports. Indian export parity is at USD 470/MT FOB levels, domestic prices in West & South India (bulk exports are made from these regions) are hovering around INR 34,500-36,500/MT (USD 468-495), ex-mill.
3. Scrap prices in International market have remained stable. This means domestic scrap and sponge iron prices may find support. Scrap prices in global market are less likely to witness sharp decline on limited offers from US.
4. Landed cost of imported Shredded scrap is around INR 28,500-29,000/MT in Mumbai. Considering a conversion spread of around INR 7,000/MT (USD 95). Billet prices are likely to hover in the range of INR 35,500-36,000/MT (USD 481-488).
5. Recent price hike by major mills – Indian mills have announced hike in long & flat steel prices by INR 1,000-1,500/MT (USD 14-21) in October. Although trade volumes at high prices are heard to remain low, but sentiments might remain supported because of price hike.
There are anticipations that there are less chances for further consistent fall in prices from current levels as standalone producers of Sponge, Ingot, Billet & Rebars are running their plants below to conversion (margins). However buying interest and trade inquiries remain a matter of concern.
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