How have Indian steel, raw material prices changed since Jun'21?

Prices of all key input materials for steel-making have increased substantially except for iron ore, data compiled by SteelMint reveals.

• South African RB2 coal: The data reveals that, as per the bi-weekly coal index tracked, ex-Gangavaram port-side prices of the RB2 (5500 NAR) thermal coal imported from South Africa have risen the most amongst all raw materials, by a whopping 61% from INR 8,000/tonne (t) levels in June-July to INR 18,000/t in October.
  China, after slapping a ban on Australian coals, turned the scanner on other sourcing markets, including South Africa, scooping up in large volumes. Subsequently, South Africa faced supply issues due to a civil unrest and train derailment at Transnet. Subsequently, a shortage in natural gas supply in Europe is leading to rising coal demand with countries stocking up ahead of the approaching winter.
  
  
• Domestic thermal coal (from SECL auctions): These prices have risen 43% in the period under review due to sudden upsurge in power demand as the country started unlocking after the second wave of the pandemic started receding. In Aug-Sept'21, India's power requirement was 124 billion units (BU) per month compared to 106 BU in the same months last year. But Coal India, the domestic supplier, was unable to meet the ballooning demand. It made slow progress in raising production and dispatch volumes to power plants, because of the heavy monsoons this year. Indian power plants are facing a coal shortage of 60,000-70,000 t per day, as domestic auction prices skyrocketed from INR 2,450/t in June to INR 8,000/t in October.
  
  
• Silico manganese (60:14): Prices, tracked on a biweekly basis in the Raipur market, have shot up 38% over June-October. China is the key factor here. With its steel production cuts and power crisis shutting down several power-intensive ferro alloy units, supply tightness has led to spiraling prices. Indian smelters, taking advantage of the scarce supply, have been demanding record high prices that have ranged from INR 98,100/t in June to an astronomical INR 135,500/t in October. The domestic shortage and high prices of coal are supporting the elevated ferro alloy prices.
  
  
• Iron ore pellets: After hovering at around INR 16,100/t in June, prices cooled off to INR 11,000/t levels in September but clawed back to almost INR 14,000/t in October on renewed export interests on a restocking rush ahead of winter sintering controls in China. The 24% increase is a result of the sudden spurt in global iron ore prices after China returned from the Golden Week holidays as well as hike in sponge prices, although export demand is still low compared to domestic.
  
  
  
• Sponge iron: A key feed for induction-based mills, this material has been facing the main challenge of rising South African imported and domestic coal prices. In fact, sponge iron manufacturers are heard unable to lift domestic coal for the past two months due to priority being given to the power sector by Coal India in terms of supply. From INR 30,500/t in June, these are hovering at INR 35,300/t, up 17% over this period.
  
  
• Coking coal: The Australian HCC prices escalated 15% in the period under review from $200/t in June to $425/t in the current month. China's ex-Australian buying spree opened up ex-China markets for Down Under, pulling up prices but reducing Indian imports.
  
  
• Pig iron: The uptrend in coking coal prices has made coke, an important raw material for pig iron production in the blast furnace, costlier, dragging up pig iron prices 4% in the period under review from INR 38,800/t to INR 46,200/t in October.
  
  
• Scrap: Lockdown blues and then the semi-conductor shortage impacted auto production which has hit domestic scrap generation. Prices have been volatile due to the demand ebb and flow in semi-finished and finished steels but HMS (80:20) ex-Mumbai prices have risen 9% in this period from INR 34,300/t to INR 37,900/t in October.
  
  
• Steel: Prices of semis and long products - billets, rebar and wire rods - have risen 14%, 12% (BF-grade), 18% (IF-grade) and 16% respectively, because of the rise in raw material costs (sponge, coal, ferro alloys, power etc). The longs market is mainly catered to by the sponge-based induction furnaces, which are grappling with high coal prices, whereas BF-grade rebar can have coking coal forward contract buffers.
  In comparison, HRC (produced by the larger mills) prices have edged up a nominal 4% since these have specialised applications, command higher margins, have a better export market and thus mills are able to absorb the rising input costs to an extent.
  
  
• Iron ore: After hitting stratospheric highs of $230/t around May, global prices have cooled off to around $123/t due to severe steel production cuts in China, the world's highest consumer of iron ore. China's weakened appetite has lowered exports from India, dragging down domestic prices in the process. Weekly prices of fines from Odisha are down 11% and lumps 8% over June-October. Fines prices have fallen from INR 9,650/t in June to INR 6,150/t in October while lumps have ranged from INR 14,000/t to INR 10,000/t in this period.
  
  

Outlook
While iron ore prices will likely remain stay subdued due to China's curbs, the global energy crisis may slow down manufacturing activities, including that of steel and its downstream industries. This may change the pricing matrix going forward. We have to wait and watch.