India: Domestic HRC trade prices edge up, restocking demand slows

Domestic flat steel prices have moved up in key markets this week with the resumption of trading activities after the Diwali holidays. However, restocking continues to remain slow after the festive holidays.

Meanwhile, the Chennai market is facing logistical issues because of an orange cyclone alert announced recently, and heavy rainfall since the beginning of last week.

Trade reference prices:

Factors driving the rise in trade segment prices

1.Mills increased prices for Nov'21: During the first week of Nov, some leading Indian steel mills, both government-owned as well as private, took a hike of around INR 2,000/t ($25) elevating the effective list prices of HRC to INR 71,500-72,500/t ($960-973) exy-Mumbai basis, excluding GST @18%. The price hike announcements had been driven by the increasing cost push and improved restocking activities in Oct.

With mills raising prices, traders too increased their offer prices for HRC as the market resumed after the festive holidays.

2.Import scenario: At present, imports from FTA countries such as South Korea and Japan are not viable due to higher offers at around $975/t FOB levels.

Although, when it comes to China, domestic prices are at a premium of around INR 2,500/t in comparison with the landed cost of imports, it is unlikely that traders will explore this option. The bookings made shall be for Jan'22 shipment and delivery will happen in Feb.

3.Government spending on infrastructure projects: The government has taken major steps to boost the country's infrastructure as the economy emerged out of the second wave of Covid-19. The Maharashtra Metro Rail Corporation has granted the letter of acceptance (LoA) to JK Infra for an INR 168.22 crore project recently. The company has also started work on the Surat underground metro rail project.

Besides, JK Infra has also received an INR 450 crore order for construction of a water tunnel, SteelMint learnt from media reports.

Tata Steel plans maintenance shutdown in Nov-Dec: Steel major Tata steel is planning to undergo maintenance shutdown at its Jamshedpur works (installed capacity 11 mn t/year) in Nov and Dec, SteelMint learnt from reliable sources.

Out of the three steel melting shops (LD), LD 2 will be put on maintenance towards end-Nov for eight days, while operations at LD 3 will remain suspended for 10 days at the beginning of Dec. Combined production loss is pegged at approximately 270,000 t.

Furthermore, the Kalinganagar plant, with crude steel capacity of around 3 mn t/year, will undergo maintenance shutdown for seven days in Dec. The impact on production will be around 100,000 t approximately.

Outlook

Trade level prices in the domestic market are unlikely to see any major correction in the near term as Indian mills are bullish on keeping the price momentum sustained owing to the government's focus on infrastructure spending, demand revival from the housing/construction sector, and limited opportunity for imports.