India: HRC trade prices edge up on anticipation of price hikes by mills in April

Trade-level prices of hot-rolled coils (HRC) remained firm in the domestic market amid anticipation of a price hike announcement by the major mills in the first week of Apr'22.

Factors keeping trade prices strong:

Flats prices to remain firm despite decline in raw material prices: The prices of imported coking coal started to edge down in the second half of the month after hitting an all-time high. The daily price assessment of Australian origin premium hard coking coal (HCC) reached the peak of $704/t CNF Paradip as on 15 Mar'22 and started to gradually decline after hitting $562/t CNF on 31 Mar'22. However, on a quarterly basis, the prices stand at $507/t in Q1CY'22 compared with $378/t CNF in Q4CY'21 and $283/t CNF in Q3CY'21. Thus, the mills are looking on to pass on the cost burden in the trade segment, which will keep the prices elevated in the short to medium term.

Honouring of MoUs and contractual purchases keep market active: Entering into the final two weeks of the fiscal, distribution network participants turned active in booking their balance volumes for the MoUs and other contractual terms signed with the mills. This has largely kept the trade activities in motion for the past two weeks.

However, some participants are concerned about the timely delivery by mills after the recent spike in HRC export bookings.

"The demand from the end-user community lacked the lustre compared to the spike in restocking activities. Moreover, the purchases from the end-user industries remain need-based and might weigh on trade activities in the domestic market in the near term," sources informed.

Healthy overseas orders: Mills are currently holding good volumes of HRC export orders until mid-May on robust export bookings in the recent past. This is another factor that shall pose challenges for supplies in the domestic market.

Moreover, while enjoying higher net sales realisations (NSR), mills have been booking HRC for exports to Europe since mid-Feb. For instance, export offers to the European market rose by about $250/t since the beginning of March, rising with each subsequent booking till the recent deal reported at $1,365/t CFR Europe for May delivery.

Meanwhile, mills are offering HRC for exports to the UAE this week. Current price indications are at around $1,100-1,110/t CFR mostly for end-May or early-June deliveries.

Near-term outlook
The expectation with regard to the price hike announcement in the first week of April is around INR 2,000-3,000/t, SteelMint learnt trader sources. However, concerns are also rising about the acceptance of any further price hike amidst sluggish demand.