BigMint Analysis: Indian steel prices decline y-o-y in Nov'24; domestic iron ore defies trend

In November 2024, India's domestic iron ore prices have remained elevated on y-o-y basis despite a cooling trend in the domestic and global market. On the contrary, steel prices (flats & longs) have not been on the same pace amid weak finished steel market dynamics.

BigMint goes behind the scenes:

• Odisha iron ore fines index rises y-o-y on lower dispatches: BigMint's Odisha iron ore fines (Fe 62%) index increased by around INR 550/tonne (t) ($7/t) y-o-y in November, 2024 (till date) compared to November, 2023. Prices are on ex-mines basis, including royalty, DMF & NMET. The eastern region experienced an increase in raw material prices due to a supply-demand imbalance, driven by the limited availability of high-grade material and a steep drop in dispatches owing to transport-related issues. Notably, Odisha iron ore dispatches had hit over one-year low in Sept'24. In light of this, and the active bidding in Odisha Mining Corporation's (OMC) iron ore auction, other private miners followed suit by raising their offers.
  
  
• Global iron ore prices drop sharply on lower crude steel output: Global iron ore prices witnessed a significant fall of around $28/t y-o-y in November, 2024 against the same month previous year. This drop followed a government stimulus announcement that failed to meet market expectations, leading to increased caution among participants. China's crude steel production in January-October 2024 edged down by 3% y-o-y to 850.73 million tonnes (mnt) compared to 876.97 mnt in the corresponding period last year (CPLY). Additionally, weak demand in the downstream steel sector dampened buying interest. The recent depreciation of the USD/CNY exchange rate also raised the cost of seaborne iron ore for Chinese buyers, squeezing landing margins and further curbing purchasing activities.
  
  
• Australian coking coal prices decrease y-o-y by over $100/t: On the similar front, coking coal prices also went down y-o-y by around $117/t, FOB Hay Point, Australia in November, 2024, data maintained with BigMint shows. Heavy rainfall and flooding in Queensland, a major coking coal-producing region, disrupted mining operations and logistics. This reduced the supply of high-quality metallurgical coal, tightening the market. Additionally, higher crude steel output in India, restocking from EU, limited mines investments in Australia pushed offers up.
  
  
• Trade-level HRC prices fall y-o-y on increased imports: Hot-rolled coil (HRC) prices fell sharply by up to INR 7,125/t ($84/t) y-o-y in the month under review compared to November, 2023. Notably, the expected surge in demand has not yet materialised as the current market is characterised by selective purchasing, driven by specific needs. Liquidity constraints are further making the situation more difficult. Domestic traders, too, are adopting a cautious approach, leading to an overall sluggish environment. Increased supplies, falling exports and increased imports have put prices under pressure. India's steel imports rose a significant over 51% to 5.4 mnt in H1FY'25 from 3.6 mnt in H1FY'24. Two major factors encouraged imports. One was, of course, the dumping at predatory pricing. For instance, domestic trade-level HRC prices, ex-Mumbai, averaged INR 52,033/t ($616/t) in H1FY'25 whereas landed prices from China in this period were lower by INR 1,316/t ($16/t) at INR 50,717/t ($601/t). Secondly, globally prices downtrend in this period. For instance, Chinese HRC offers fell 12% y-o-y in April-September, 2024 while Japanese ones declined 10%.
  
  
• Trade-level BF rebar prices fall, but lower than HRC: Trade-level blast furnace (BF) rebar prices also witnessed a y-o-y drop of around INR 1,000/t ($12/t) in November, 2024. However, the drop was lower compared with those seen in HRCs owing to supply issues in the BF route rebar segment, falling inventories, and better demand in projects post-monsoon receded.
  
  

What next?

As of November, 2024, it appears unlikely that India's iron ore prices will experience significant reductions in the immediate future. While the global cool-off may continue, the factors influencing the domestic market - decent demand, logistical constraints, and rising production cost suggest that high prices will persist in the coming future.

For steel manufacturers and industries reliant on iron ore, this means higher costs, which could be passed on to consumers. One of the major India-based integrated steelmakers raised the issue during a discussion with BigMint, questioning whether any policy changes or improvements in logistical efficiency from the government could provide relief to steelmakers in the coming months?