India: Domestic billet prices fall to 5-month low amid declining sponge prices

Indian domestic billet prices have fallen to a five-month low, according to the latest assessment by SteelMint. Billet prices in Raipur, Chhattisgarh, are recorded at INR 43,400/t exw on Saturday, the lowest since 15 December 2022. Similarly, in the Durgapur market in West Bengal, prices stood at the same levels as in Raipur i.e., INR 43,400/t DAP, the lowest since 6 December 2022.

Why have prices fallen?

• Decline in sponge iron prices: Sponge iron, a key raw material for billets production, witnessed a significant downward price correction. Current prices are standing at a 5-month low level. Fresh offers for C-DRI mix (70% lumps, 30% fines), FeM 80% (+/-1) stand at around INR 29,500/t exw-Rourkela, down by INR 2,000/t m-o-m.
  
  
• Abundant coal supply: As per CoalMint data, the country recorded a historic growth in its coal output at 892.21 million tonnes (mnt) in FY23. Total production was 15% higher compared to 777 mnt in FY22. Despite this, India's coal imports increased sharply by around 18% y-o-y to over 237 mnt in FY23 from 202 mnt in FY22. The abundant availability of coal has resulted in reduced costs for sponge iron producers, enabling them to offer their material at lower prices which, in turn, impacted billet prices. Non coking RB2 (5500 NAR), South African offers have come down by around $50/t to $120/t CNF Gangavaram, India recently (since Dec'22).
  
  
• Improved iron ore availability: India's total iron ore production in FY23 was recorded at 255 mnt, up by a mere 2 mnt compared to 253 mnt in the preceding fiscal. Looking at this, NMDC, in its recent announcement, has decreased base prices for its iron ore auction from Donimalai mines, Karnataka. Prices for fines (-10mm, Fe 59%) have been set at INR 2,877/t, down by around INR 100/t and for lumps (10-40mm, Fe 61%) at INR 3,132/t, down by around INR 300/t. Prices exclude royalty, DMF and NMET.
  
  
• Increase in crude steel output: India's crude steel output witnessed a 4% y-o-y rise in FY23, reaching 125.32 mnt compared to 120.29 mnt in the previous year. The increased steel production led to higher billet supply, which, combined with subdued demand, exerted a downward pressure on billet prices.
  
  
• Subdued steel exports: India, being a significant player in the global steel market, heavily relies on exports to balance its domestic steel production. However, subdued international demand, coupled with trade restrictions and tariffs imposed by some countries, resulted in lower exports of steel products. Semi-finished steel exports from India fell to the lowest at 0.023 mnt in December 2022. The export volumes continue to remain low till Feb'23 at 0.053 mnt.
  
  
• Low demand for finished steel: Demand for finished steel products, including billets, has been low in the domestic market. The key consuming sectors, such as construction and automotive, are experiencing a dip in demand due to economic uncertainties and reduced activities. This has put pressure on billet prices as steel manufacturers strive to maintain competitive pricing to stimulate demand.