India: IF route rebar trade prices remain subdued in Aug'24
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India's induction furnace (IF)-route rebar prices remained under pressure in August 2024. Rebar (Fe 500) prices dropped in the range of INR 200-1,700/tonne (t) m-o-m as per BigMint data.
Rebar (IF and BF route) production figures showed a positive trend, with production from January to July 2024 totalling 27.5 million tonnes (mnt), an 8% increase compared to the same period last year. This growth may reflect manufacturers' confidence in demand recovery or growth potential in the construction sector, despite current pricing challenges. The m-o-m increase of over 2.8% in rebar production from June to July 2024 (rising from 4.018 mnt to 4.13 mnt) suggested a strengthening of production activity. This uptick may indicate that manufacturers are responding to underlying demand or preparing for expected increases in construction activities, even amid cautious buyer behaviour.
Factors behind market dynamics
Drop in raw material prices: A decline in the prices of major input materials, such as sponge iron (PDRI) and billets, has contributed to a further drop in finished steel prices. PDRI sponge prices fell by INR 100-350/t m-o-m across regions. Meanwhile, scrap HMS 80:20 prices varied by INR 100-1,100/t m-o-m across markets.
Pressure of rising inventories: Despite a modest decline in billet and sponge iron prices, rebar producers have struggled to adjust their offerings due to sluggish demand. Mills have reduced production by 20-25% amid rising inventories, which now range from 12-15 days across markets. In August, mills managed to sell only about half of their daily output, leading to an accumulation of inventory. Additionally, the movement of previously booked material was slow. To address this, manufacturers were compelled to lower prices and offer discounts to clear their stock.
BF route price trends: BF-rebar trade prices dropped by INR 3,200/t m-o-m to a monthly average of INR 50,200/t exy-Mumbai due to sluggish demand in August 2024, with buyers purchasing only on an urgent-need basis throughout the month. However, towards the end of August, some major mills increased rebar list prices by up to INR 1,000/t, which helped stabilise the price decline. The monthly average price gap between BF and IF route rebars narrowed by around INR 1,800/t to INR 4,500-5,000/t ex-Mumbai in August, compared to INR 6,500-7,000/t in July.
Outlook
The outlook for the IF route rebar market remains challenging in the short term, with prices likely to face continued downward pressure. Rising inventories, weak domestic demand, and cautious market sentiment are expected to persist, keeping prices range-bound or under pressure.