India: Trade-level HRC prices under pressure; imports and slowdown in buying major concerns

Trade-level HRC prices continue to remain under pressure for yet another week. News about inbound low-priced HRC in the market and need-based procurement from buyers weighed on prices, as per SteelMint assessment. However, in the key Mumbai market prices stood unchanged.

SteelMint's benchmark HRC (IS2062, 2.5-8mm) weekly price assessment is at INR 56,000-56,500/t. On the other hand, CRC (IS513 Gr O, 0.9mm) prices dropped INR 800/t to INR 62,000-63,000/t. Prices are on an exy-Mumbai basis, excluding 18% GST.

Factors impacting market:

1. Domestic supplies stabililsing: Supplies that were falling short in the past few months started improving in October. Steel mills in their results announced for the quarter ended September infromed of phased maintenace shutdowns taken during the three preceding months. JSW (4.95 mnt) and Tata Steel (4.64 mnt) both reported marginal decline of 1% and 2%, respectively, in their crude steel production volumes in Q2FY23 (vs Q1FY23). JSPL (1.81 mnt) posted a 9% q-o-q decline. SAIL (4.3 mnt) and AM/NS India (1.70 mnt) reported stable production during the period.

Now, the mills have started ramping up production slowly. This has increased concerns around inflow of more material into the market in the near term.

2. Global concerns: Exports of HRC from India have been under a leash since the announcement of 15% duty on 21 May, 2022. SteelMint's India HRC export index also dropped to $518/t FOB east coast, hitting a two-year low mark, as per the assessment on 8 November. In the current week, major mills had put their offers on and so the index remained unchanged.

Chinese and Vietnamese mills have reduced their HRC prices for domestic sales. Chinese steel major Baosteel reduced HRC prices by RMB 100/t for December sales earlier this week. Meanwhile, Vietnamese steel manufacturer Formosa Ha Tinh (FHS) cut its HRC (SAE1006, skinpassed) prices by $40/t to $555/t CIF Ho Chi Minh City (HCMC) for January and early-February 2023 sales.

The rally in Chinese SHFE HRC furtures (January 2023 contracts) seen until yesterday has come to a halt. HRC futures have dropped by RMB 24/t d-o-d to RMB 3,777/t from the previous day's settled price of RMB 3,801/t.

Buying on the global platform remained lacklustre in the recent past dragging down prices from other exporting countries as well as China, Japan, South Korea and others.

3. Imports turn viable, deals under negotiation: The Indian HRC market is witnessing increased competition from cheaper alternatives. The market is abuzz with the news of imported HRC arriving at Indian ports by the end of this month. Furthermore, it was heard that negotiations for around 40,000-50,000 t were on with Vietnamese exporters for delivey in December, which is yet to be confirmed.

4. Buying turns need-based, again: Market sentiments which improved in the late-July to Septmeber period have turned lacklustre again since October. It bears recall that mills had announced price hikes towards end-September and early-October in anticipation of improved buying before the festive holidays. However, the early exit of participants from the market ahead of the holidays in October and the late resumption in November kept the market dull. Moreover, market chatter is that the growing prospect of cheaper imports has impacted sentiments further.

"Buyers have again resorted to need-based buying in the wake of the decline in trade-level prices of HRC since the market reopened post Diwali and Chhath Puja," a source informed. "The market failed to maintain the gradual momentum in buying interest witnessed till end-September. Expectations of a surge in trades post the festive holidays have fallen flat," another source said.

Near-term outlook
Trade-level HRC prices are likely to remain under pressure as cheaper alternatives are available globally, while domestic mills have been trying hard not to reduce their list prices by a significant margin, a major distributor source told SteelMint. Sources are apprehending a reversal of need-based procurement in the traders' market.