India: HRC-rebar spread rises after four-month gap in Aug'24, but prices still under pressure

• Imports, global prices keep flats under check
  
  
• Raw material price slide keeps longs on leash
  
  
• Global price uptrend may favour Indian prices
  
  

Morning Brief: The HRC-rebar spread reversed to normalise in August, 2024, after a gap of four months, reveals BigMint data. Usually, hot rolled coils (HRCs) are sold at a premium to rebars. However, it may be recalled, over April-July, 2024, rebar remained consistently priced higher than HRCs.

In August, the spread rose a nominal INR 400/tonne ($5/t) with the benchmark trade-level HRC (IS2062, 2.5-8mm) prices averaging INR 50,600/t ($602/t) against the blast furnace-route rebar's (12-32mm) INR 50,200/tonne ($598/t). Both categories fell m-o-m but rebar a steeper 6% compared to the HRC's 3%.

What factors normalised the spread?

HRCs

Excess supplies keep HRC prices under check: Flats continued to face challenges of prolonged dull demand. As a result, hot rolled (HR) and cold rolled (CR) coil producers were forced to reduce list prices by INR 1,000-2,000/t ($12-24/t) w.e.f August.

Excess supplies of HRCs also discouraged mills from increasing prices m-o-m. This, in turn, helped to keep domestic prices above Chinese export offer levels.

Imports, exports, global prices dampen flats sentiments: However, it may be noted that the spread normalised by a highly nominal INR 400/t ($5/t). Three factors played a role here. One was the imports pressure which did not allow mills to raise prices m-o-m. If trade-level domestic HRC prices hovered at INR 50,500/t ($602/t) in August, then landed prices from FTA countries were at INR 48,900/t ($583/t) and the Chinese tags an even lower INR 48,400/t ($577/t). HRC and plates import volumes rose a still disturbing 39% m-o-m to 0.57 mnt provisionally in August (0.41 mnt).

Secondly, global prices slid m-o-m. Chinese HRC offers dropped 6% and Japanese, by 3% in August 2024.

Thirdly, exports continued to remain a no-show for Indian mills, keeping them on the backfoot. Mills have stepped back from the Vietnam and Middle East markets since May this year. Volumes have been falling m-o-m since February this year.

Rebars

Prices slide amid continued slack demand: In rebars, BF-route prices down-trended through the month as demand failed to perk up. In fact, prices fell steadily for 11 consecutive weeks. It was only towards the end of August that prices showed a slight uptick on the back the INR 750-1,000/t ($8-12/t) increase in the list prices of primary mills.

Induction furnace rebar prices, which also recorded consistent falls for weeks, rebounded slightly towards the month-end. But persistently slow demand forced IFs to offer deep discounts. Their inventory levels averaged 12-15 days of idling time. This prompted many to calibrate production downward in tune with the slack demand trend, with the spread with BF-route material increasing to INR 4,000-4,500/t ($48-54/t) last month.

Raw material price slide fails to support rebar: August saw prices of raw materials sliding m-o-m, and which further failed to keep rebar prices supported especially for IF mills which command the lion's share of the market. This factor also had a spin-off effect on BF-grade rebar. Pellet-based sponge iron prices from Raipur dipped 4% m-o-m to INR 24,666/t ($294/t). Europe-origin HMS 80:20 scrap inched down 2% to $379/t CFR Nhava Sheva in August.

The Fe63 Odisha iron ore fines index dropped 4% to INR 4,570/t ($54/t). The Raipur pellet index dipped 2% in August to INR 8,972/t ($107/t) while the billet index slipped 2% to INR 38,504/t ($459/t).

Outlook

Global prices are showing a slight uptrend. September also ushers in the tail-end of the monsoon. Clearer skies from October traditionally herald the onset of the demand season for steel in India. These two factors may impact Indian steel prices positively. On the other hand, if import volumes sustain, then flats may still remain under pressure.