India: HRC- CRC spread widens further in domestic market

Domestic CRC prices have continued uptrend this week after the major steel mills recently announced second price hike for the month. Also demand supply mismatch resulted in further upside in CRC prices.

On the other hand, dull sentiments in the HRC market have softened prices. This has resulted in widening the gap between HRC and CRC prices in Indian domestic market.

SteelMint's benchmark price assessment of CRC (0.9mm, IS 513 Gr) stands in the range of INR 49,750-50,000/t (exy- Mumbai), up by INR 1,500 w-o-w. Meanwhile HRC prices softened by INR 200-250/t w-o-w and stood in range of INR 40,750-41,000 (exy- Mumbai).Prices do not include GST extra @18%.

Thus the gap has increased to around INR 8,500-9,000/t which is generally around INR 5,000-6000/t .

Reasons driving domestic CRC prices:

1. Mills lift CRC prices for 2nd time in Sept- JSW Steel, AMNS, POSCO and SAIL have further raised CRC prices by around INR 1000-1250/t on tight supply and improved demand from auto and white goods sector. Meanwhile in the beginning of Sep'20 steel producers have raised CRC prices by almost INR 3,000-3,500/t.

2. Production issues in CRC mills- Market sources shared with SteelMint that, govt owned SAIL Bokaro steel plant is facing some issues in its CRM mill since the last few days .Also CRCA mill 1 in JSW Vijaynagar plant has halted the production due to expansion plans. However mill was expected to resume operations from April onwards but due to increased Covid cases in plant it got delayed. If market sources to be believed AMNS is also facing some production issues. This leads to short supply in domestic market

3. Improved demand in the auto sector - Maruti Suzuki India Limited (MSIL), India's largest car seller, has reported 17.1% (y-o-y) growth in its August sales at 124,624 against 106,413 units in Aug'19. The company has reported a 15.3% growth m-o-m as compared to 108,064 units in Jul '20. Also, with the start of the festive season and easing of lockdown restrictions, auto sector demand may show some improvement in the coming months.

Trade prices of other regions-

• HRC (IS 2062, 2.5 - 8mm) prices stood at INR 41,500-42,000/t (exy-Delhi & Chennai) Prices do not include GST extra @18%.
  
  
• CRC (0.9 mm IS513 GR) were assessed at INR 50,000- 51,000/t (ex-Delhi & Chennai) Prices do not include GST extra @18%.
  
  

Outlook- The main reason understood behind price hike is tight availability of CRC. Market participants are of opinion that prices may soften on easing supplies.