India: HRC trade segment prices fall on decline in export offers

Indian hot-rolled coil (HRC) prices continued to decline further across regions on the back of sluggish demand and a drop in export offers amidst lack of buying interest and increased competition this week.

SteelMint's benchmark price assessment for HRC stood at INR 74,500-75,500/t ($979-992/t), down INR 1,600/t w-o-w. CRC, too, fell by INR 900/t to INR 87,000-88,000/t ($1,143-1,156/t) on the week. These prices are basic excluding GST at 18% on exy Mumbai basis.

Factors behind price correction in trade segment:

Steep drop in export offers: Indian HRC export index dropped by $70/t to $940/t FOB east coast on 20 Apr from $1,010/t FOB a week ago. Buying sentiments in overseas markets took a severe hit due to availability of cheaper alternatives.

Chinese mills are offering HRC at around $950-970/t CFR UAE, whereas offers from India stood higher at $980-1,000/t CFR UAE. Meanwhile bids are being heard below $950/t CFR basis from UAE-based buyers. Also, the Easter holidays in Europe kept the market silent for most of the previous week; however, the offers have dropped to $1,130-1,150/t CFR Antwerp (north Europe) compared with the previous week's indication of $1,150-1,200/t CFR Europe.

Need-based procurement from end-users: End-user industries have been closely tracking the raw material price movements. "Buyers have switched to need-based procurement on the back of sustained raw material cost pressure," trader sources said. For instance, a steep increase in Australian premium hard coking coal (HCC) prices from $409/t CFR Paradip, India on 7 Apr to $541/t CFR on 21 Apr kept HRC and CRC prices elevated in the domestic market. This has dampened demand in the trade segment as end-user industries are limiting their procurement.

Performance indices indicate slower growth: In the Apr'21-Feb'22 period, industrial output saw a growth of 12.5% as against a contraction of 11.1% in the corresponding period of FY'21. Though industrial output increased at a greater rate in Feb than in Jan, the rate of expansion remains subdued. The manufacturing sector, which makes up over three-fourth of the Index of Industrial Production (IIP), grew by just 0.8% in Feb, down from 1.3% in Jan. For instance, growth in capital goods output slowed to 1.1 % on a y-on-y basis from 1.4% in Jan'21, while consumer durables and non-durables witnessed a contraction compared to the same month of last year.

Near-term outlook

Demand continues to remain impacted on high prices weighing on domestic trade sentiments. Trader sources are expecting the mills to offer rebates on HRC and CRC to encourage buying and improve overall market sentiment.