India: HRC, CRC trade prices continue edging lower on low buying interest

The trade market prices of HRC and CRC continued moving downwards in mid-May on the back of low buying interest amidst falling prices on the global platform as well as weakening of demand in both global and domestic trade markets.

SteelMint's benchmark price assessment for HRC stood at INR 69,000-70,000/t ($889-902/t), down INR 2,100/t ($27/t) w-o-w, while CRC prices fell by INR 2,000/t ($26/t) to INR 79,000-80,000/t ($1,018-1,031/t). Prices are basic excluding GST at 18% on exy-Mumbai basis.

Factors weighing on domestic trade prices-

1. Indian HRC export prices under pressure: India HRC export index dropped $39/t w-o-w to $821/t FOB east coast against last week's $860/t FOB level. Buyers in the Middle East are holding back in anticipation of a further decline in prices and a steep drop in offers to the EU amid bid-offer disparity. Besides, there are not any firm enquiries from Vietnam.

Vietnamese major Formosa Ha Tinh has cut July and early-August sales prices for HRC (SAE1006, skinpass) by $95/t to $855/t CIF Ho Chi Minh City (HCMC). Hoa Phat is yet make an announcement.

Moreover, global participants opine that declining global HRC prices, volatility in ferrous futures and emerging bid-offer disparities are likely to weigh further on Indian HRC export offers in the near term. This, in turn, is weakening domestic sentiments.

2. Industrial growth index indicates slowdown in core sectors: Industrial production growth remained subdued at 1.9% in March compared to a year ago, mainly due to poor performance by the manufacturing sector. The meagre pick-up in industrial growth in March was because of 0.9% output growth in the manufacturing sector which was slightly up from 0.5% growth in February. The bleak three-month low 0.7% growth in capital goods output in March did not bode well for a pickup in investment activity in Q4FY22 as the fall will be a matter of concern for the policy makers. The IIP for the entire fiscal grew by 11.3% which comes on a low base as the factory output had contracted by more than 8% in the previous fiscal.

3. Sluggish trade continues: With the drop in this week's trade prices, the gap has further expanded compared to mills' offers to the distributors. Trades are happening but the volumes are relatively low with buyers procuring on urgent requirements only. It is to be noted that, the mills' list price for HRC stands around INR 76,000-76,500/t ($979-986/t) exy-Mumbai basis, and exclusive of GST @18%. Trade market participants are anticipating that mills may offer rebates in the near term to drive sales.