India: High inventories continue to weigh on rebar prices. Will the tide turn?

• Inventories at primary mills surge
  
  
• 20-25% rise in inventories at secondary mills
  
  
• High inventories to pressure prices in Q1CY'24
  
  

Steel prices in the domestic market are under pressure and long steel prices more so due to rising inventories. For quite some time now, buyers in the long steel segment are wary due to the consistent decline in prices, the widening gap between BF/IF-route rebar prices, and the tendency of market participants to engage in need-based purchases.

As per sources, rebar inventories with the primary mills are at around 600,000 t - there has been an addition of 150,000 t in November and 100,000 t in October.

Generally, it has been estimated that rebar inventory stays in the range of 300,000-350,000 t.

"Fear of continuous price fall has kept buyers away from market, resulting in sluggish demand and higher inventories," a buyer source from the projects segment stated.

Secondary mills saddled with inventory

SteelMint analysis shows that the secondary steelmaking units are having to deal with a surge in inventories, which is estimated to have risen by 20-25% across regional markets.

Sources have informed that IF rebar inventories are high in most markets because of slow lifting of booked material by traders, cash crunch and liquidity issues, consistent fall in raw material prices, and uncertainty in market created by need-based buying activity.

Notably, the production of IF-route rebar stood at 2.9 mnt in November, which is 11.5% higher as against 2.6 mnt in October. Higher production and softening demand have led to the rise in inventory.

It is poignant to note that the price gulf between BF and IF rebars dictate purchase choices: project segment buyers are quick to shift to IF rebar if price dynamics are favourable compared with BF-route material.

Outlook

Rebar prices may remain under pressure in January 2024 and the secondary mills might opt to curtail production despite Q1 being a good quarter in terms of demand. This is largely because of inventory pressure amid slow movement of construction and infra building activity right before the General Elections.