Go to List

India: Domestic HRC prices bearish on dull demand

Domestic HRC trade prices continued to remain under pressure as market sentiments were bearish amid sluggish sales. SteelMint’s prices for the benchmark 2.5 mm ...

Finish Flat
By
2022 Reads
22 Jul 2021, 19:43 IST
India: Domestic HRC prices bearish on dull demand

Domestic HRC trade prices continued to remain under pressure as market sentiments were bearish amid sluggish sales.

SteelMint's prices for the benchmark 2.5 mm hot-rolled coils (HRC) remained unchanged at INR 64,000-65,000/tonne (t) exy-Mumbai for the second consecutive week. The prices mentioned above are exclusive of GST @18%.

However, prices in the other key markets of Chennai and Faridabad saw a decline over the previous week.

India: Domestic HRC prices bearish on dull demand

Why are domestic HRC prices falling?

1. Anticipation of rebates from mills to push buying- The downstream industries and end-users have turned observant and are postponing purchases on expectations that mills may provide rebates to whet buying interest. Market participants expect a rebate of INR 1,500-2,000/t from major steel mills in Aug'21.

At the beginning of Jul'21, mills were offering HRC at around INR 68,000-68,500/t in the trade market. Mills are looking to sell material in the domestic market but due to dull demand, higher prices are not getting accepted in the market.

2. Traders holding enough stocks- Trade participants told SteelMint that currently they are holding around 20-25 days' inventory in hand and are less likely to procure fresh material at higher prices. Once this inventory starts easing, traders might resume buying.

3. Inactive buying in auto, consumer segments- End-user demand for auto and consumer durable goods had taken a hit in the early months of FY'22. Although, major players in these segments managed to perform decently well in Q1, still, higher input costs remain a concern. The auto segment accounts for 10-12% of the total steel consumption while fast-moving durable goods (FMCD) hold a 5% share.

4. Limited activity in the construction sector due to rains- The impact of the monsoon this year has weighed even more on the infrastructure and construction segments, for which the rainy season is a weak period, as it is. Both on-site activities and logistics are being affected by the unusual rain patterns and related issues. The Indian Meteorological Department (IMD) recently forecast heavy rainfalls in central Maharashtra and coastal regions of southern India between 21-24 Jul'21, as per media reports.

On the other hand, SteelMint expects that prices may remain range-bound due to the following reasons:

  • Increase in HRC export offers- SteelMint's Indian HRC (SAE 1006) export index moved up by $14/t w-o-w to $896/t FoB east-coast basis, after falling for eight consecutive weeks. A few HRC export deals aggregating to 60,000 t were reported to be concluded to Vietnam at around $925-930/t CFR in the last week.

  • Uptrend in Chinese futures- According to the data maintained with SteelMint, the Shanghai Futures Exchange's (SHFE's) HRC futures Oct contracts closed at RMB 5,947/t ($) on 22 Jul'21, up by RMB 29/t on a d-o-d basis.

Outlook
Domestic HRC prices are expected to remain under pressure in the near term due to sluggish sales. Demand is expected to rebound if mills provide price support to escalate buying. However, mills may shift their focus to export sales on higher price realisation if the domestic trade market continues to remain sluggish.

 

22 Jul 2021, 19:43 IST

 

 

You have 1 complimentary insights remaining! Stay informed with BigMint
;