India: Domestic HRC trade prices bottom out as imports turn unfavourable

Domestic trade-level prices of hot rolled coils (HRC) are said to have bottomed out on the back of improved global market sentiments and costlier imports, SteelMint understands from industry sources.

SteelMint's benchmark assessment (weekly) for HRCs (IS2062, 2.5-8mm) stood range-bound at INR 53,500-54,500/ tonne (t) while that of CRCs (IS513 Gr O, 0.9mm) was at INR 59,000-60,000/t as on 21 December 2023. Prices mentioned are on an exy-Mumbai basis, excluding GST @ 18%.

Why have trade prices bottomed out?

1. Global markets echo positive sentiments: Global HRC export offers had been on a decline during May-November. The Russian invasion of Ukraine had pushed export offers higher in February-April. This led to a decline in overseas demand which started exerting downward pressure on export offers from late-May. Meanwhile, Indian export offers and trades were hindered by the levy of the 15% export duty on non-alloyed steels in late May.

However, since the beginning of December, export offers have started showing improvement. For instance, Chinese HRC (SS400) offers have risen from $545/t FOB Rizhao at the beginning of December to $600/t FOB this week, as per data maintained with SteelMint. Indian HRC export offers have also followed suit. This week, SteelMint's HRC (SAE1006) export index was assessed at $597 FOB east coast compared to $535/t FOB as on 6 December 2022.

Moreover, Indian mills have withdrawn offers this week and will come up with fresh offers in early January. This has lent some support to domestic market sentiments.

2. Imports turn non-lucrative: The difference between domestic trade-level and imported HRC prices is reducing, another major factor that is easing the downward pressure on the former.

On a monthly average basis, the landed cost of imports was at a discount of INR 5,500/t in August as against the domestic HRC trade prices. This gap peaked to INR 10,000/t in November which led to increased import bookings.

For instance, 6,62,136 t of HRC/plates were booked for imports in August-November, which accounts for 63.5% of the the total imports booked till November this fiscal year.

However, with the global HRC exports offers on a rise the difference between landed cost of imports and domestic trade prices has reduced to INR 3,000/t in December. Thus, buyers are shying away from booking new imports.

3. Steel consumption on a rise: The apparent steel consumption is likely to grow in the near future. The major steel consuming sectors like infrastructure and construction, power generation and distribution and others are likely to open up with FY2022-23 inching to an end. In April-November 2022, the apparent steel consumption increased by 11.9% to 75.34 million tonnes (mnt) compared with the year-ago period, as per the provisional report of the Joint Plant Committee. Moreover, the same increased by 13.4% y-o-y to 9.7 mnt in November 2022.

Outlook:
SteelMint understands from industry sources that mills are eyeing a hike of INR 1,500-2,000/t in HRC prices for early January 2023 dispatches on the back of improved market sentiments and healthy consumption outlook.