Falling Export Realizations Weigh on Indian Domestic HRC Prices

Indian HRC prices continue to show a downward trend on several factors like subdued demand from auto sector, tight liquidity, rising inventories and falling global prices.

Indian steel mills are quite aggressive in export market in order to liquidate higher inventory levels. This has made export realizations highly co-related with domestic prices (shown in the graph).

According to data maintained by SteelMint, HRC exports from India have shown a sharp increase from a monthly export rate of 2,00,000 - 2,50,000 MT to 5,00,000 - 600,000 MT in last two months. This is equivalent to about 25% of total merchant trade of HRC in India.

Gap between export and domestic realization narrows down : As noticed in the graph, price gap between Indian domestic HRC prices on ex mill basis versus export realizations on ex-mill basis, is narrowing downwards.As per the graph mentioned above, Indian HRC export realizations vs domestic HRC prices is showing the gap of around INR 1,000-1,500/MT from the month of Jul'19.

How we derived export and domestic realization- For export realizations, we have considered monthly average prices of HRC on FoB India basis and deducting a net of $15/t for handling at port, local transportation and adding rebate. For domestic realizations, we have considered an average freight deduction of INR 2,750/t from our ex- Mumbai assessment.