Global steel, raw material prices weaken in CY'24. Will New Year bring cheer?

• HRC offers drop as Chinese economy struggles; India prices under pressure
  
  
• Turkish imported scrap prices fall amid billets surge, slack rebar demand
  
  
• Benchmark Fe62% iron ore prices to China drop 8% y-o-y
  
  

Morning Brief: Global and domestic steel and raw material prices headed south in calendar year 2024 (CY'24), with subdued steel demand depressing trade momentum in most commodity segments. Domestic silico manganese (60-14, ex-Raipur) and Russian pig iron (FOB Black Sea) prices were the only exceptions to this downtrend, recording marginal hikes of 1% and 3% y-o-y, respectively.

A range of factors weighed on steel and raw material prices, resulting in sluggish demand. Foremost among these was the flailing Chinese economy, which inundated various geographies with massive volumes of competitively-priced steel exports. Second, geopolitical tensions, such as the Red Sea Crisis and the Gaza War hamstrung sea routes and drove up lead times. Third, major economies such as India, the US, Japan, Turkiye, and the UK went to the polls, which kept market sentiments cautious.

BigMint goes behind the scenes:

Factors impacting global steel, raw material prices in CY'24

Hot-rolled coils

Chinese HRC offers falter as realty sector struggles: In the flats segment, Chinese hot rolled coil (HRC) offers lost 12% over the year to an average of $520/tonne (t) FOB in 2024 from $590/t in 2023.

Chinese HRC offers lost significant ground, reeling under the weight of a crumbling realty sector. With domestic demand steadily going downhill, steelmakers were forced to turn to exports to recoup costs. However, as countries closed off their borders to protect the interests of domestic steelmakers, Chinese steelmakers adopted aggressive pricing tactics to make their offers irresistible.

Data from China's General Administration of Customs posit that during January-November 2024, China exported 101.152 million tonnes (mnt) of steel, a surge of 22.6% y-o-y.

India's export market contracts under Chinese onslaught: India's export offers eroded by a smaller degree, just 6%, to $580/t FOB in 2024 from $620/t in 2023.

However, because of cut-throat competition from China, Indian exporters intermittently kept offers on hold throughout the year because of unviable prices. Additionally, anti-dumping investigations and import restrictions in Europe kept volumes subdued.

In H1 of CY'24, HRC export volumes stood at 2.5 mnt, which halved to 1.1 mnt in H2.

Domestic HRC tags decline as supply outstrips demand: India's average domestic HRC prices shed 10% y-o-y to settle at INR 51,310/t in 2024 compared to INR 57,140/t in 2023.

Again, an influx of cheap HRCs from China created a supply glut in the market, which was already grappling with mounting inventory pressure as supply outpaced demand. While the initiation of a safeguard duty investigation towards the end of the year has helped allay fears related to imports, substantial damage had already been done. Liquidity shortfalls beset the market in October-December as low prices persistently chipped away at market participants' operating expenses and profit margins.

Rebars

Turkish rebar drops amid weak construction activity: Turkiye's rebar prices dropped 6% y-o-y in 2024, to an average of $590/t FOB from $630/t in the preceding year.

First, the global construction industry was burdened by rising inflation, higher input costs, and labour issues, which weakened demand. Second, the flurry of cheap Chinese exports minimised the scope of Turkiye's seaborne opportunities. Third, due to the Gaza War, the Ministry of Commerce prohibited exports of rebars to Israel, which is one of Turkiye's largest markets for such products.

Indian rebar prices drop amid subdued demand: Rebars manufactured by the blast furnace (BF) route stood at INR 53,430/t in 2024, down by 6% y-o-y from INR 56,690/t in 2023. Similarly, induction furnace (IF) route rebars were assessed at an average of INR 48,400/t in 2024, down 7% from INR 52,080/t.

Subdued demand kept both BF and IF prices in a vice-like grip. A significant factor was the delisting of certain steel suppliers by the National Highways Authority of India (NHAI) for quality standard violations. Additionally, with several elections scheduled during the year, the government's focus was on welfare programmes rather than infrastructure projects. This particularly led to low demand in the project segment.

Billets

Black Sea billets see red: Black Sea billets edged down by 4% y-o-y to $490/t FOB from $510/t.

Contributing to the downtrend were the following:

(1) the rush of cheaper Chinese billet imports;

(2) the resulting low demand in Turkiye, which is typically a major buyer of Black Sea billets;

(3) falling scrap prices globally, which, like rebars, failed to keep billets supported;

(4) the global slump in steel demand;

(5) pressures of sanctions amid Russia's war with Ukraine; and

(6) Russia's export tax on billets and other products, which aims to increase supplies for domestic consumption.

Domestic billets prices drop as steel demand slackens: BigMint's India billet index ex-Raipur eroded 8% y-o-y to settle at an average of INR 40,360/t in 2024 from INR 43,850/t in 2023, as muted steel demand hampered the trade momentum for billets.

Scrap

Turkish imported scrap prices fall as billet imports surge: Imported HMS (80:20), CFR Turkiye, dipped by 3% y-o-y to an average of $380/t in 2024 from $390/t.

Prices declined on increased billet import volumes, which pressured scrap demand. The depreciating Turkish lira and subdued rebar export demand also weighed on scrap prices.

However, due to increased crude steel production, Turkiye's ferrous scrap imports are expected to reach 20 mnt in CY'24, with the January-November period already recording an import volume of 18.2 mnt, 6.5% higher y-o-y.

India's domestic scrap tags dip: Domestic HMS (80:20) prices DAP Mumbai were assessed at an average of INR 33,540/t in 2024, down by 7% as compared to INR 36,190/t in 2023.

Factors that pressured prices of domestic scrap include (1) the national elections, which slowed down market activity; (2) liquidity challenge; (3) slowdown in the global steel sector; (4) comparatively weaker demand y-o-y in key consuming sectors, including construction and infrastructure; (5) inventory pile-up due to limited sales; and (6) increased GST checks and enforcement of the Reverse Charge Mechanism (RCM).

India's imported scrap offers drop as mills prefer local sources: European-origin shredded offers to India went down by 5% to an average of $410/t in 2024 from $430/t in 2023.

Amid reduced steel demand, mills largely preferred local scrap over imported material. For example, imported European HMS (80:20) scrap was, on average, INR 1,600/t costlier than domestic scrap during CY'24. This was primarily attributed to the Red Sea Crisis, which resulted in longer lead times and higher freight and fuel costs.

Consequently, India's ferrous scrap imports are projected to plunge by 25% in CY'24 to around 8.3 mnt from 11.03 mnt in CY'23, as per provisional data available with BigMint.

Iron ore, pellets

China's iron ore index declines on supply glut: Prices of Fe 62% iron ore fines, CFR China, fell 8% y-o-y to $110/t (on average) from $120/t over the same period.

China's imported iron ore fines (Fe 62%) spot prices fell, driven by ample inventories at ports and poor domestic steel demand. Additionally, narrowing profit margins of mills prompted increased BF maintenance shutdowns and reduced molten iron production, which dampened demand for iron ore.

Low sponge iron tags weigh on India's iron ore prices: India's domestic iron ore fines index averaged INR 5,030/t in 2024, inching down by 2% from INR 5,130/t in 2023. Prices were largely stable but under pressure due to subdued steel demand and declines in pellet and sponge iron prices.

Although the iron ore auctions from the Odisha Mining Corporation (OMC) witnessed active participation and kept prices supported, weak demand signals from China, which accounts for over 90% of India's exports, limited India's opportunities for seaborne trade. This led to a 14% y-o-y drop in iron ore exports in CY'24, while production increased by around 2% y-o-y.

Pellet prices hold firm on rising input costs: BigMint's pellet index DAP Raipur witnessed a marginal drop of 0.3%.

Pellet prices in central and eastern India received support from active participation at OMC's auctions. This lifted manufacturing costs significantly and prompted miners in eastern India to raise prices. Favourable market sentiments in the raw material and downstream segments also supported active buying during the festive season.

However, towards the end of the year, there was downward pressure amid thin margins of sponge iron players. Declining export offers led to volumes from eastern India getting diverted to the central region and pressuring supply dynamics in that region.

Coal

PHCC prices plunge as imports rise: Premium hard coking coal (HCC) from Australia, CFR India, plunged by 16% y-o-y to $260/t in 2024 from $310/t in the previous year amid supply pressures. To illustrate, imports of metallurgical coal are expected to rise by around 5% y-o-y to 75 mnt in CY'24. However, the decline in steel and met coke prices weighed on imported coking coal tags.

Thermal coal prices fall: RB3 (4800 NAR), ex-Gangavaram, fell 14% to INR 7,840/t in 2024 from INR 9,150/t in 2023. Prices of South African coal, CNF Gangavaram, dropped 10% y-o-y to $90/t from $100/t.

Thermal coal imports to India remained largely stable at 173 mnt in CY'24 versus 175 mnt in CY'23, while India's production increased by over 7% y-o-y to more than 1 billion tonnes (bnt). Sufficient supplies, ample port stocks, and a decline in sponge iron prices weighed on thermal coal tags.

Sponge iron

Pellet-based sponge iron (PDRI) prices softened by 9% y-o-y to INR 27,420/t from INR 30,280/t as lower steel demand constrained trade momentum.

Pig iron

India's pig iron tags drop amid surplus supply: Domestic steel-grade pig iron prices, ex-Durgapur, moved down by 7% y-o-y to INR 38,040/t from INR 41,010/t because of a supply glut in the market. One reason for this was the substantial volumes of imports from Russia, which raised inventories. Secondly, domestic merchants increased supplies amid heightened production, as Evonith lit up its second blast furnace in November. Thirdly NMDC-Nagarnar, under pressure to liquidate its HRC inventories, turned its focus aggressively on selling pig iron in the domestic market.

Outlook

BigMint predicts a soft start to the year. With steel demand still lacklustre amid ongoing anti-dumping investigations, potential US-China tariff tensions, and geopolitical conflicts portending turbulence, the first half of CY'25 may not see substantial improvements in steel prices.

In India, the gap between crude steel production and steel consumption is expected to widen in CY'25. While crude steel production was 148 mnt in CY'24, it is projected to rise to 165 mnt this year. However, steel consumption is expected to grow at a more sedate pace from 147 mnt in CY'24 to just 152 mnt in CY'25. This portends further pressure on domestic steel and raw material prices.