Domestic steel, raw materials prices show mixed trends in Jan'25 amid sluggish market movements

• Prices of pellets, wire rods rise m-o-m
  
  
• South African thermal coal sees sharpest fall
  
  
• HRC, IF rebar tags remain stable m-o-m
  
  

Morning Brief: Domestic steel and raw material prices exhibited mixed trends in January 2025 as various segments grappled with the consequences of persistently soft demand in the finished steel sector.

While prices of nine commodities decreased, tags of three increased. Prices were stable for the rest. BigMint goes behind the scenes:

Factors that impacted domestic steel, raw material prices

Coal

Monthly average prices of both coking and non-coking coal declined m-o-m. South African non-coking coal experienced the steepest drop among all commodities.

Australian premium hard coking coal (HCC): In January, Australian PHCC was assessed at $200/tonne (t), down 5% from December's $210/t. Notably, in January 2024, prices were at $350/t, which implies that prices have almost halved over the year. In January, prices were affected by limited buying interest, wide bid-offer disparities, and weak steel tags. As shipments to India were limited, sellers quoted higher offers. However, buyers, refused to match these quotes, bidding far lower due to the ongoing depression in the steel market.

Additionally, Australian indexed prices were under stress due to limited inquiries from China amid the Lunar New Year holidays. China also implemented the sixth and seventh rounds of met coke price cuts this month, which precluded any attempt to lift coking coal offers.

Non-coking coal: Indexed portside ex-Gangavaram prices of RB3 (4800 NAR) stood at INR 7,370/t in January compared to INR 7,760/t in December, reflecting a drop of 5%.

Traders struggled to secure sales amid limited demand because (1) certain end-users held adequate inventories; (2) some others sponge players curtailed production or shut down plants; (3) the supply of key grades improved due to regular auctions by Coal India Limited (CIL) subsidiaries; and (4) prices fell at the auctions from the South Eastern Coalfields Limited (SECL). Additionally, buyers, expecting further price drops, delayed procurement.

Meanwhile, CNF Gangavaram prices of the same grade from South Africa stood at $70/t in January, plunging by $10/t or 13% from December.

India's portside prices of South African-origin thermal coal fell in January. This was primarily due to (1) high port stocks, (2) softening demand (possibly due to lower sponge iron output), (3) falling sponge iron prices, and (4) ample availability of domestic alternatives.

Ferro alloys

Silico manganese: The silico manganese index (60:14 grade) for Raipur increased 6% m-o-m to INR 69,900/t in January from INR 66,180/t in the previous month.

Prices hit a three-month high in early January following production cuts of 45-50% in December 2024 in all key manufacturing hubs. Additionally, MOIL lifted offers for manganese ore lumps below Mn44% by 5% in January. With most sellers booked out, limited spot availability for January deliveries also led to a panic buying situation. Overall, silico manganese prices increased amid tight supply, rising demand, and higher raw material costs.

Scrap & metallics

Prices in this segment were largely stable m-o-m, with domestic melting scrap and sponge iron edging down by 1-2%.

Sponge iron: Prices of sponge iron (pellet-based), ex-Raipur, moved down by 1% to INR 24,480/t in January from INR 24,650/t in December. Sponge CDRI mix dropped by the same percentage to INR 25,780/t from INR 26,150/t in the previous month.

Sponge iron prices fell on subdued demand, with buyers adopting a cautious approach amid uncertainty and slower trades in the finished steel segment.

Pig iron: Offers were largely unchanged m-o-m, registering a minuscule uptick in the period under review, to INR 33,410/t ex-Durgapur in January from INR 33,280/t in December.

Amid slack demand and ample availability, competition intensified in the market, leading pig iron producers to reduce their offers to attract buyers. Low finished steel demand also limited price support.

Melting scrap: HMS (80:20) prices dipped by 2% to INR 32,040/t DAP Mumbai in January from December's INR 32,620/t. Muted demand for both semi-finished and finished steel products curbed scrap consumption, which led to a decline in prices.

Imported melting scrap: In contrast, tags of European-origin containerised shredded scrap held firm m-o-m at $380/t (INR 33,100/t) CNF Nhava Sheva in January. Imported ferrous scrap offers held firm m-o-m, apart from slight variations of $2-3/t. Tepid demand was observed, as steel sales were relatively low, and buyers were biased towards domestic scrap due to its cost-effectiveness. A depreciating rupee led to elevated import costs, and bid-offer disparities further discouraged buying. Global economic uncertainties and safeguard duty concerns also hindered trade momentum.

Iron ore

Iron ore prices recorded mixed movements, with price variations of 1-4%.

Fines, lumps: In January, iron ore fines prices eroded by 4% m-o-m to INR 5,070/t ex-mines Odisha (from INR 5,290/t in December).

BigMint's Odisha iron ore fines index (Fe 62%) inched down m-o-m amid need-based procurement, as demand in the sponge iron and semi-finished steel markets remained subdued. Export demand also contracted due to the ongoing Chinese Lunar holidays, leading to increased domestic supply. However, material availability concerns emerged, especially for high-grade ore, as some miners' environmental clearances are due to expire ahead of fiscal year-end.

At the January auction of the Odisha Mining Corporation (OMC), bids (weighted average) for fines dropped by INR 200-250/t m-o-m on improved dispatches and an increase in offered volume. NMDC decreased list prices of iron ore calibrated lump ore (CLO) and fines from Chhattisgarh by INR 350/t in January.

Meanwhile, lumps saw a slim 1% m-o-m drop to INR 7,120/t ex-mines Odisha (INR 7,220/t in December). Some sponge iron players, particularly in eastern India, showed a preference for lumps over pellets. This supported lumps tags to a certain degree.

Pellets: Prices edged up by 4% to INR 9,530/t DAP Raipur in January from INR 9,180/t in December.

Central India saw an incremental increase in sponge iron capacities, and active procurement took place from south India. These factors helped boost prices.

Steel

Major price movements were absent in the steel segment, with the market relatively stagnant due to tepid demand.

Billets: Tags stood firm m-o-m at INR 39,070/t in January compared to INR 38,930/t ex-Raipur in December.

Trading activity picked up after the New Year holidays, but the momentum could not be sustained. Procurement was cautious amid weak finished and semi-finished steel market sentiments.

Rebars, wire rods: Prices of blast furnace (BF) grade rebar declined by a marginal 1% to INR 52,340/t ex-Mumbai in January from INR 52,870/t in December. BF rebar prices remained largely stable due to limited market movements. Due to tepid demand and uncertainty regarding the market direction, cautious buyers stayed on the sidelines. The list price hike announced for early-January sales was not absorbed by the market, which ultimately prompted mills to cut tags for end-January dispatches. The drop in coking coal and iron ore fines prices also failed to support prices.

Meanwhile, induction furnace (IF) rebar prices were level m-o-m at INR 47,070/t ex-Mumbai against INR 46,900/t in December. While slow demand led to two-three weeks of reduced procurement in the initial part of the month, buying activities improved eventually, which motivated producers to hike offers or reduce trade discounts.

In contrast, wire rods (ex-Durgapur) rose slightly by 2% to INR 42,270/t in January from INR 41,530/t in December.

HRCs: Prices of hot-rolled coils (HRCs) ex-Mumbai saw a slight rise to INR 47,040/t in January from INR 46,880/t in December, a change nearly negligible in percentage terms. The hikes implemented for January were not absorbed by the market, and most locations faced strain due to subdued demand and declining sales. However, Mumbai's offers increased, as import stocks declined, and optimism rose regarding the possible implementation of a safeguard duty.

Meanwhile, India closed the month with bulk HRC and plate imports of 471,623 t, stable as against December 2024.

Outlook

The Budget was expected to provide a significant fillip to the steel sector, with the implementation of a safeguard duty soon to follow, and substantial infrastructure investments. However, it fell short of the industry's expectations. As a result, steel and associated segments are expected to trend down in the near term.

Another cause for concern is US President Donald Trump's protectionist policies. Tariffs have already been announced on imports from China, Canada, and Mexico, although they have been paused on the latter two for a short period. Geopolitical tensions around tariffs may adversely impact India and, of course, the steel industry.