India: HRC trade prices down 8% m-o-m in Dec'21

Trade prices of hot-rolled coils (HRC) dropped by 8% m-o-m in the key market of Mumbai on the back of a continual decline in export offers and rising inventory pressure. The average monthly prices of HRC stood around INR 65,400/tonnes (t) ($879/t) exy-Mumbai in Dec'21 as against INR 70,900/t ($953/t) exy-Mumbai a month ago.

SteelMint's benchmark HRC (IS 2062, 2.5-8mm) prices for the current week were assessed at INR 63,000-64,000/t (down, INR 1,100/t), while those of CRCs (IS 513 Gr O, 0.9mm) were at INR 67,000-68,000/t (down INR 1,400/t). Prices mentioned above are on an exy-Mumbai basis, and exclusive of GST @ 18%.

Reasons for continual southward trend -

1. Indian HRC export index drops 10% m-o-m in Dec'21:
Indian mills had been consistently reducing their export offers for the overseas markets since the beginning of Nov'21 to entice buyers. On a monthly average basis, SteelMint's India HRC export index stands around $760/t (INR 56,539/t) FOB east coast in Dec'21, down by $81/t (INR 6,026/t) against $841/t (INR 62,571) FOB in Nov'21.

2. Rising inventories to keep price levels under pressure:
Trade channel checks suggest that the export scenario will continue to remain bleak in the near term as realisations are much lower compared to the domestic market. For instance, current export realisations are around $725-730/t FOB (INR 54,000-55,000/t levels) while on the other hand, domestic net sales realisations (NSR) of mills are ranging beween INR 61,000-62,000/t ($820-833/t). This will drive mills to focus on liquidating inventory (earlier earmarked for exports) in the domestic market, which is already dealing with high inventory levels and projecting flat steel demand to be range-bound in Jan'22.

Asides from the above, TSL's Jamshedpur and Kalinganagar plants, which underwent planned maintenance shutdown in Dec'21 (leading to an inventory loss of around 2.5 lakh tonnes), have now resumed operations. JSW Steel's commissioning of the 5 mn t pa second phase of the Dolvi plant will also propel domestic steel inventory to rise in Jan'22.

Therefore, rising inventories will keep prices under pressure in Jan'22.

3. Correction in raw material prices:
Prices of raw materials have seen a decline m-o-m in Dec'21, further weighing on the sentiments. On a monthly average basis, SteelMint's Odisha iron ore fines (0-10mm, Fe 63%) index has fallen by 10% m-o-m in Dec'21 to INR 5,300/t ($71/t) ex-mines. Meanwhile, prices of imported premium hard coking coal (HCC, Australian origin) has dropped by 5% m-o-m to $359/t CFR (INR 26,711/t) Paradip in Dec'21. However, prices of these steelmaking raw materials have shown an increase towards the end of Dec'21.

Near-term outlook:
Looking at the continual correction in HRC trade prices and concerns over increasing stockpiles on the back of sluggish overseas demand, Indian mills are likely to correct list prices by INR 1,500-2,000/t ($20-27) for early-Jan'22 deliveries, SteelMint understands from reliable industry sources.