India: Ferrous scrap prices in Chennai drop INR 400/t w-o-w on weak steel demand - 19 Dec

*Heavy downpour, cyclone weigh on trade activities

*Scrap prices expected to fluctuate in the near term

According to BigMint's latest assessment, the price of HMS (80:20) decreased by INR 400/t w-o-w, settling at INR 30,900/t in Chennai, India. However, prices remained stable d-o-d. In contrast, billet prices saw a d-o-d increase of INR 100/t, reaching INR 41,900/t, while prices rose by INR 400/t w-o-w.

Rebar prices held steady d-o-d at INR 46,300/t but rose by INR 500/t on a weekly basis. Despite these upward price adjustments for billets and rebars, demand for finished steel remains average, and liquidity challenges continue to affect the market.

Imported, domestic market trends

The imported scrap market is very quiet, with little activity seen. Right now, prices for HMS are around $365/t, and shredded scrap is being offered at about $378-383/t CFR Chennai. Australian shredded is changing hands at $375-380/t CFR (with one deal heard earlier at $370/t CFR Chennai for 1,000 t). Sellers are unwilling to reduce offers despite ongoing difficulties in the region.

India's proposed 25% safeguard duty on steel imports may have mixed effects. The duty is meant to protect local steel producers and stabilise prices, but it may not have a big impact overall. Around 62% of steel imports come through FTAs and will not be affected, but the remaining 38% will face higher costs. Though this may seem like a small share, it is still significant.

In the domestic market, HMS (80:20) prices were at INR 30,500-31,000/t for buyers paying within seven days. For those opting for extended payment terms, prices increased to INR 31,000-31,500/t. The bulk of offers was concentrated within the INR 30,500-31,000/t range, with most transactions heard at this price point. Market participants are adopting a cautious approach, with bids being closely aligned with the current liquidity conditions and payment schedules.

Buyer-supplier sentiments

A mill representative informed BigMint that demand for finished steel has been constrained over the past couple of weeks, largely due to the rainy season and cyclone, which has disrupted trade activities. The market is anticipated to see some positive movement in the first week of January. However, due to the Pongal festival in mid-January, a temporary lull in market activity is expected thereafter.

According to a scrap supplier, the persistent rains in Chennai since yesterday has caused a slowdown in the local steel market. While billet and rebar prices have risen due to demand from other key markets, trade volumes remain subdued. Mills are also lowering scrap purchase prices in order to manage conversion costs effectively.

Regional comparison

In the Jalna market in western India, billet prices increased by INR 300/t d-o-d, reaching INR 41,800/t, while rebar prices rose by INR 200/t to INR 47,500/t. Meanwhile, HMS 80:20 prices edged up by INR 100/t to INR 32,100/t. Over the last few days, there has been a notable increase in demand for finished steel. Since Monday, rebar prices have improved by INR 300/t, while HMS 80:20 prices also have seen a more modest increase of INR 300/t.

Outlook

With the end of the rainy season, the market is expected to see a boost in trade activity for finished steel. However, scrap prices are expected to remain within a relatively narrow range, with fluctuations of INR +/- 500/t in the near term, driven by prevailing market dynamics.