BigMint India steel index slips into negative zone w-o-w, longs on sticky wicket

• IF rebars feel inventory pressure in dull market
  
  
• Growing HRC imports continue to challenge flats
  
  
• Rising SHFE futures drag down export offers
  
  

Morning Brief: The BigMint India Steel Composite Index, after flickering positively for a week, fell back again into negative zone. The index dipped weekly 0.7% to close at 144.6 points (145.6) on 14 June, 2024.

Both the longs and flats indices fell w-o-w as well.

Factors that influenced the index last week.

BF-route rebars fall in slow market: Long products were on a weaker wicket last week as the overall index for this segment fell 1.22%. Trade-level blast furnace (BF)-route prices fell by INR 300/tonne ($4/t) to INR 57,800/t ($692/t) levels ex-Mumbai and minus the 18% GST. On cue, project segment prices dropped by around INR 500/t ($6/t) to INR 56,500-57,500/t ($676-688/t).

The low demand trend has sustained ever since the pre-election buying frenzy dried up.

Post-elections, even though enquiries are trickling in, few are translating into actual deals.

IF rebar falls, inventory pressure rises: India's induction furnace (IF)-route finished long steel prices continued to move downward last week too. Trading activities remained slow in the spot market owing to subdued buying interest. Sellers offered trade discounts to liquidate rising inventory. However, buyers remained cautious and opted to wait and watch in anticipation of further price correction. IF rebar prices, in fact, experienced a steeper INR 600/t ($7/t) drop w-o-w to INR 51,400/t ($615/t).

Raw material prices also failed to offer support to finished IF steels. Both sponge iron (PDRI) prices, ex-Raipur, and the BigMint Raipur billet index, fell 3% w-o-w.

HRC prices up marginally but CRCs fall back: Benchmarked trade-level hot rolled coil prices, ex-Mumbai and minus 18% GST, inched up a slight INR 100/t ($1/t) to INR 54,000/t ($646/t) w-o-w. Cold rolled coil prices, however, dipped by INR 200/t ($2/t) to INR 60,600/t ($725/t).

As with longs, here too demand continued to remain slack. Imports are rising yet again which is subjecting mills to margin pressures in the face of few domestic deals.

Additionally, CRCs are facing supply constraints with some cold rolling mills having been put under maintenance.

Exports continue to remain unexciting: The export segment faced yet another unexciting week with mills continuing to hold back offers. Chinese offers to the Middle East dropped by $5/t and those to Vietnam by $5-10/t. In such a scenario, mills had no option but to stay away from the market.

Chinese offers fell on the back of the $3/t w-o-w fall in Chinese HRC futures traded on the Shanghai Futures Exchange.

EU demand was absent as buyers there preferred domestic material in the face of some aggressive local selling.

Outlook

The short term looks somewhat dampened because of the approaching monsoons, which can take a toll on steel demand, especially those related to construction. Thus, rebars, other longs, fabrications, and related flat items may see a decline in sales in the near future.

Exports may also continue with the same dull trend amid the Eid-al-Adha festival, starting early next week, which may keep market participants away.

India Steel Composite Index

The India Steel Composite Index is assessed on a weekly basis, every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.

BigMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, BigMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India.