India: HRC, CRC prices fall by up to INR 1,000/t ($13/t) w-o-w

Trade-level prices of hot-rolled coils (HRCs) and cold-rolled coils (CRCs) continued to decline this week on the back of slow demand. Moreover, the levy of 15% export tax and expectation of market participants of an increase in supplies in the distribution network further weighed on sentiments.

SteelMint’s benchmark price assessment for hot rolled coils (HRCs) stood at INR 62,500-63,500/t ($804-817/t), down by 700/t ($9/t) w-o-w, while CRC prices fell by INR 1,000/t ($13/t) to INR 71,500-72,500/t ($919-932/t). Prices are on an exy-Mumbai basis, and exclusive of GST at 18%

Why have price levels remained under pressure?

Export duty weighs on Indian HRC export offers: The announcement of the 15% export duty late on 21 May 2022 led to a withdrawal of offers for Indian HRCs from the overseas markets. Mills, after a gap of two weeks, came up with offers steeply down by $91/t compared to the levels seen just before the announcement. SteelMint's India HRC (SAE1006) export index was assessed at $730/t FOB east coast India this week, contrasted against $820/t FOB assessed on 17 May 2022. Moreover, mills are heard to have been offering alloyed (boron-added) HRCs for exports and testing the traditional markets of Vietnam and the Middle East for acceptance of the same.

This steep drop in export offers and the expectation that supplies would be diverted to the domestic market weighed further on market sentiments.

Softening raw material prices: The recent steep fall in raw material prices has been another dampener for buyers. SteelMint's Odisha iron ore fines index (0-10mm, Fe-62%) gradually dropped to INR 3,600/t ($46/t) as on 4 June 2022 from the levels of INR 6,050/t ($78/t) as on 23 May 2022. Furthermore, on 7 June, State-owned NMDC reduced base prices of iron ore by INR 1,160-1,200/t ($15/t) for both fines and lumps for its auction from the Donimalai mines. The floor price of fines (Fe62%) was set at around INR 2,398/t ($31), while Fe63% fines prices were at INR 2,504/t ($32/t) (basic, excluding royalty). The base price of lumps (Fe 64%) stands at INR 2,757/t ($35/t) (basic, excluding royalty).

Meanwhile, imported coking coal prices also showed a signficant decline of $81/t in the last couple of weeks. The weekly averge price for imported coking coal (Premium HCC, Australian origin) stood at $473/t CNF Paradip, India as of week ended  4 June compared to $554/t assessed for the week ended 21 June.

End-user segments slowly returning to  market
End-user industries have remained cautious of the declining market prices and have been deferring their purchases. For instance, auto contracts for H1FY23 have still not been concluded as the automakers are deferring the discussions anticipating a futher fall in price levels. Many buyers are procuring on an urgent need basis in anticipation of further decline in prices.  However, trade channel checks suggest that buying activities are likely to pick up from hereon. "The demand in the market is likely to pick up from here, as it cannot go lower. Some of the buyers who had been delaying purchases to see where the market  bottoms out, are likely to come out of hibernation and procure amidst depleted inventory levels," said a major distributor from western India.

Demand from end-user industries is likely to re-emerge. "Our order book shows buyers are returning, especially in drums and barrels, packaging, furniture etc. Dealer-level enquiries are also trickling in," said a mill source.

Near term outlook: Major Indian flat steel producers announced list prices of HRCs at INR 65,000/t exy-Mumbai basis for early-June sales. Meanwhile, Chinese HRCs (SS400) were assessed at $815/t CFR India basis. Thus, the landed price of imported Chinese-origin HRCs comes to around INR 70,053/t ($901/t) exy-Mumbai basis, which is still higher by INR 5,053/t ($65/t). Prices of Japanese- and South Korean-origin HRCs amount to around INR 66,468/t ($855/t) exy-Mumbai. These prices may restrain buyers from booking HRCs from overseas markets and support mills in keeping their price levels firm in the near term. Prices mentioned above are exclusive of GST @18%.