India: Domestic HRC prices soften on sluggish demand

Indian HRC trade prices declined by INR 1,500-2,000/tonne (t) this week in the northern region due to slow demand in the domestic market. Traders shared with SteelMint that, "Buying enquiries remain dull and we are reluctant to procure material at such higher prices." At the beginning of this month, Indian mills sharply raised HRCs and CRCs prices by around INR 3,000-4,000/t for Jun'21 deliveries to reduce the gap between international and domestic prices.

Prices fell in the traders' market due to following reasons:

1.Wide gap between trade,mill prices: This week, SteelMint's benchmark prices for 2.5mm hot-rolled coils (HRCs) stand moderate at INR 66,500-67,500/t (exy-Mumbai) against last week. On the other hand, major steelmakers are offering HRCs at INR 70,000-70,500/t (exy-Mumbai). Prices mentioned do not include GST @18%. Thus, the gap between offer and actual price is INR 2,500-3,000/t, resulting in limited trade. Normally, trade and mill prices are at par or trade prices are higher by INR 1,000/t over mill prices.

2.Mute domestic buying: "The trade market continues to remain dull and quite. Nobody is ready to lift the material. As a result, prices continue to fall in the Faridabad market" major traders in Faridabad and Mumbai said.

A major steel mill is ready to offer rebates on prices due to increased allocation of HRCs in the domestic market on reduced exports. However, traders are less likely to procure HRCs at higher prices. Also, with the arrival of the monsoon season construction activities will remain halted. Demand in the monsoon usually remains sluggish.

3.Auto contracts not yet finalised for Q1- Automobile customers are not settling the prices with mills for the first quarter (Apr-Jun'21), Thus, Indian mills may take a hard stand on supplies to auto, SteelMint learned from reliable sources. Auto industry sources say, "The second Covid wave dealt a harsh blow to OEMs. Dealerships were closed and sales were down. Such a steep price hike against this backdrop will not be viable."

3.Reduced exports to preferred destinations- Indian mills usually export HRC to Vietnam, the UAE, and Europe. However, this time buying interest is limited from Vietnam due to cheaper prices in the domestic market. Meanwhile, the UAE re-rollers have completed one round of bookings while, the Indian HRC quota to Europe, has been exhausted. This, in turn, creates pressure among Indian mills to sell their material domestically.

Near-term outlook -Despite slow trade in the domestic market on higher steel prices, mills are less likely to correct prices in the near term.Meanwhile, a few mills have some HRC allocations for overseas markets. However, reduced buying interest globally may divert sales to the domestic market if mills provide rebates or discounts to boost sales.