India: Domestic HRC prices flat as demand remains subdued

Domestic prices for hot-rolled coils (HRC) remained rangebound this week. A few major mills rolled over prices towards the end of the previous week for Sept'21 deliveries. The traders and retailers are heard to be holding decent inventory, which holds them back from replenishing stocks as the market continues to face lack of buying interest.

SteelMint's benchmark price assessment for 2.5-8 mm IS 2062 HRC stands unchanged at around INR 65,000-66,000/t (exy-Mumbai) and CRC (IS 513 Gr O, 0.9mm) at INR 75,000-76,000/t (exy-Mumbai) in comparison with the previous week. The prices mentioned, exclude GST @18%.

SteelMint underlines the following factors weighing on prices and buying interest-

1. Slowdown in overseas trade: There has been low buying interest amongst importers for Indian HRC cargoes lately. The Middle East market has remained muted since the conclusion of the previous deal, while Vietnamese buyers are awaiting price policy announcements from domestic mills. Also, concerns over surging COVID cases persist in Vietnam. However, the government is mulling lifting the lockdown in a phased manner after 15 Sept.

SteelMint's Indian HRC export index stands unchanged at $879/tonne (t) FoB east coast compared to the previous week.

2. NMDC slashes iron ore prices for Sept'21: PSU merchant iron ore miner NMDC has announced a significant price cut of INR 1,000-1,160/t from its Chhattisgarh mines. As a result, SteelMint's weekly Odisha iron ore fines (Fe 62%) index dropped by INR 150/t, w-o-w, to INR 6,750/t (ex-mines, including royalty, DMF and NMET).

3. Gap between market and mill prices: Domestic HRC retail prices are still at a discount of about INR 1,000-2,000/t compared with the list prices of mills. For instance, the effective list prices of major steel manufacturers stand at around INR 66,000-67,000/t exy-Mumbai, while market prices are at around INR 65,000-66,000/t exy-Mumbai.

"The disparity between mill prices and those in the retail segment continues to weigh on trade activities. Most of the stakeholders across the trade channel stand at the sidelines, expecting a further decline in prices or a rebate," said a distributor from northern India.

Near-term outlook
The current market scenario indicates further softening in market prices due to the pressure of liquidating inventories amid slow overseas and domestic market demand. Market sentiment remains bearish in the trade segment. Distributors and dealers continue to feel the pressure of procuring from mills in the absence of healthy demand. Meanwhile, lack of buying intent among end-users has led to an accumulation of inventory in the supply chain.

"Most of the downstream flat steel-consuming industries have delayed their procurement, anticipating a further decline in prices in the coming weeks," said a major distributor from northern India.