India: HRC trade-level prices see milder cuts, ease marginally by $9/t w-o-w

• HRC prices continue to slide at slower pace
  
  
• Steady demand in recent past helps support prices
  
  
• Enquiries, sales affected by festive holidays in early-Sept
  
  

Trade-level prices of hot-rolled coils (HRCs) have continued to decline on a weekly basis post the price announcements made by mills last week. The weekly assessed prices of HRCs dropped by about INR 700/t ($9/t) while those of cold rolled coils (CRCs) by INR 600/t ($8/t).

End-users' demand is low at present, mostly because of the festivities. Supplies of materials are also a bit short mostly with the dealers and retailers, informed reliable sources.

SteelMint's weekly assessed prices as on 7 September 2022 for HRCs (IS2062, 2.5-8mm) stood around INR 55,000-56,000/t ($690-702/t) while those of CRCs were at INR 65,000-66,000/t ($815-828/t). Prices mentioned are on an exy-Mumbai basis, excluding GST @ 18%.

Factors behind dip in prices

a) Improvement in demand in recent past: The declines have been shallow since July 2022 as end-users' industrial demand started to improve gradually with steeper decline in prices in May and June. HRC prices had declined about INR 6,200/t ($78/t) in May and in June by $7,800/t ($98/t). Since then, the price declines have been shallower with a drop of INR 2,700/t ($34/t) in July and a further drop of INR 2,100/t ($26/t) in August.

"Demand has sequentially improved in June through August, drawing down market inventories especially those of dealers and retailers," shared a few distributors from across the country. However, the quantity in enquiries posted and sales have remained low since May but maintained a steady pace, they added.

Manufacturing indices have also shown a gradual improvement over the past few months. For instance, the manufacturing Industrial Index of Production (IIP) has shown continual growth since April 2022 from 131.8. In May, it improved to 134.5 and further increased to 136.3 in June, as per the data shared by MoSPI. Data for August is expected to be published in the upcoming days.

Additionally, the Purchasing Managers' Index grew by 56.4% in July and 56.2% in August. These figures are the best among the past nine months. This has come after the index growth had dropped to 53.9% in May from the level of 54-55% maintained since January 2022.

b) Reduced interest in overseas market: The Indian steel manufacturers' interest in export trade took a hit after the announcement of the export duty @15% on non-alloyed flat steel products in late May 2022. Also another major factor was offering alloyed HRCs (boron-added) for exports, that kept the buying interest low in overseas markets. This has largely helped in cooling down the prices as allocations for HRCs for exports were divered to the domestic market.

"Some Indian mills are showing low interest in export trade as they see domestic market realisations are better compared to overseas ones at present," shared a reliable EXIM trade source.

Moreover, flats took the major brunt of the duty announcement in June, pulling down SteelMint's India HRC (SAE1006) export index to $703/t FOB east coast from May's average of $864/t FOB. The drop was about $161/t in June and later the pace of decline slowed with $86/t in July and $38/t in August. On the other hand, China's HRC (SS400) export offers dropped by $81/t in June and $106/t in July. In August the drop was a meagre $17/t, gaining some support from the rally in the futures market.

The weekly assessment for SteelMint's Indian HRC export index dropped marginally to $575/t FOB, after staying pegged at $583/t FOB over last four weeks. Similarly, Chinese HRC (SS400) offers have dropped from $580/t FOB from the previous week's $590/t FOB.

c) Supply constraints in July-August: Limited restocking activities from the dealers and retailers in the domestic market had led to higher inventories with distributors over the past couple of months. This in turn resulted in reduced movement of materials from steel mills. Thus, to arrest the piling up of inventories, mills' opted for maintenance shutdowns in July and August months, ahead of their normal schedules. This has also lent some support to the prices in September.

Near term outlook:
Trade-level prices of HRCs and CRCs are likely to see shallow drops in the near term. Supply concerns for the same are rife owing to limited restocking carried out by distributors in the past couple of months. But, a slow yet steady inflow of inquiries and sales for lesser volumes is likely to keep the market active. Furthermore, participants said the prices are almost near-bottom and hence there will be no steeper declines in the near future, despite an expectation of improved supplies in September.