India: HRC trade-level prices rise marginally by INR 900/t ($11/t) w-o-w as mills indicate price hike

• Decline in HRC trade prices pauses
  
  
• Mills likely to announce mid-term increase in list prices
  
  

The trade-level prices of domestic hot-rolled coils (HRC) edged up by $11/tonne (t) this week as major flat steel producers are indicating a hike in prices for mid-September.

SteelMint's weekly price assessment of HRCs (IS2062, 2.5-8mm) stood at around INR 55,500-56,500/t ($697-710/t) on 7 September while those of CRCs remained unchanged at INR 65,000-66,000/t ($817-829/t). Prices mentioned are on an exy-Mumbai basis, excluding GST @ 18%.

Factors supporting trade-level prices-

1. Mills to increase prices: AM/NS India has recently announced an increase of INR 500/t in its HRC list prices for mid-September sales. Post revision, the list prices of HRC (IS2062, 2.5-8mm) stand at around INR 56,500/t ($710/t) exy-Mumbai, excluding GST @ 18%. Other primary mills are likely to follow the suit.

Following this, distribution channel partners have started offering at slightly elevated levels since last Friday. "Private steel mills have been informing distributors about a mid term price hike of INR 750-1,000/t. Thus, we have started offering at elevated price levels," informed a few reliable sources.

Demand has sequentially improved in June-August, however, it slowed down in some regions in September because of the festivities.

2. Market indices show recovery: Post decline in prices over April-June period, market indices have shown growth at a steady pace. The Purchasing Managers' Index grew by 56.2 in August, mostly in line with July's 56.4.

Furthermore, the manufacturing Industrial Index of Production (IIP) has shown continual growth since April 2022. In May, it improved to 134.5 ( from 131.8 in April) and further increased to 136.3 in June, as per data released by the Ministry of Statistics and Programme Implementation(MoSPI).

However, the manufacturing IIP dropped to 135.2 in July as against 136.9 in June as a result of steel mills taking maintenance shutdowns to counter the slow growth in their sales volumes.

3. Exports may pick up in Q3FY23: Current week's assessment of SteelMint's India HRC export index has increased slightly by $8/t w-o-w to $583/t. This was mostly because of the mills quoting higher prices to Vietnamese market. For the UAE market, offers were stable.

In addition, Europe's energy crisis is at a tipping point. A typical family in the EU could face energy bills of EUR500 per month by early next year, up 200% from 2021, as per latest report by Morgan Stanley. The intensifying energy crisis and consequent inflation in EU has pushed the mills to cut down production, forcing them to explore import options in billets and finished longs from Southeast Asia.

So is the case in Turkey. Authorities have raised electricity and natural gas prices for households by around 20% and for industry by around 50% recently. Hence, imported HRC inquiries are likely to firm up from these markets.

4. Pre-festive buying: Sales inquiries are likely to improve further ahead of the Diwali festival. Thus, few trade channel participants have started restocking and others shall follow in time, said a reliable source close to the mill. Already, demand has shown a steady growth over the past few months, he added.

Near term outlook:
Trade level prices might rise further from the current levels as other mills are likely to announce their mid-term price increases. The emerging demand-supply gap, along with a rebound in raw material prices has pushed global steel manufacturers to maintain or increase prices. For instance, China's Baosteel, Japan's Tokyo Steel, and Vietnam's Formosa Ha Tinh (FHS) have announced a roll-over in prices recently.