India: Mills eye 2nd round of price hike in HRC; trade-segment range-bound

The Indian steel majors are likely to announce a second round of price increases for sales for the month of February, after AMNS India raised HRC prices further by INR 500/t ($7/t) with effect from 8 Feb'22.

Other steel majors are likely to follow suit after having increased prices by INR 1,000-2,000/t in the preceding week for early Feb'22 sales.

Increasing cost pressures brought about by elevated prices of raw materials and exports booked in good volumes of late are the major reasons.

However, trade reference prices of hot rolled coils remained range-bound in the key markets of Mumbai and Chennai this week, barring Faridabad, which showed an increase.

Factors impacting pricing strategy of flat steel manufacturers

1. Indian HRC export offers spike by $147/t m-o-m: The Indian mills have been enjoying better demand in the overseas markets since the beginning of January. The export deals have been concluded at elevated prices since the mid of Jan'22 pushing the SteelMint's HRC (SAE1006) export index higher to the current week level of $867/t FOB contrasted against $720/t FOB five weeks back.

Moreover, Indian steel majors have collectively booked 1.14 million tonnes (mnt) of HRCs for Feb-Mar'22 shipments on the back of better demand from EU and Middle East countries.

Alongside this, the export offers from China had also started to rise just before the Lunar New holidays rising about $50/t from the offers of $765/t FOB seen towards the end of Jan'22. Meanwhile, Japanese mills also raised their offers by about $55/t since mid-Jan'22.

2. Elevated price levels of raw materials: The more important factor behind the surge in the prices is the escalating prices of raw materials. For instance, the average monthly prices of Australian-origin premium hard coking coal (HCC) have breached the previous high of $427/t CFR Paradip in Oct'21 and are currently at $464/t CFR (average till the last assessment date of 10 Feb'22).

On a quarterly basis, the prices reached a new high of $378/t CFR in Q4CY'21, up by $95/t against $283/t CFR in Q3.

Trade markets slow in absorbing price hikes
The trade market prices of HRCs are still at a discounted level as compared to the mill list prices which are in the range of INR 67,500-70,000/t exy-Mumbai. Although the prices have been on an uptrend for the past three weeks, the momentum is still slow with buying preference remaining need-based, in turn, keeping the trade volumes moderate.

"Maintaining the current pace, the end-user industry demand is likely to remain buoyant as major flat steel consuming industries will likely keep the momentum going as the fiscal year-end is closing in," shared a few reliable western India based distribution channel sources.