India: Slow demand keeps trade-level HRC prices under pressure despite removal of export duty

Trade-level HRC prices continued to reel under the pressure of slow demand as was proved by the drop seen in most markets this week. The government's announcement regarding the removal of the 15% export duty from 19 November 2022 had almost no effect on price levels. Price assessment for the key markets of Mumbai, Faridabad and Chennai remained pegged to last week's levels.

SteelMint's benchmark HRC (IS2062, 2.5-8mm) weekly price assessment stands unchanged w-o-w at INR 56,000-56,500/t ($686-692/t). Similarly for CRC (IS513 Gr O, 0.9mm), which stood unchanged at INR 62,000-63,000/t ($759-771/t). Prices are on an exy-Mumbai basis, excluding 18% GST.

Factors impacting market:

1. Cheaper overseas alternatives a concern: Imported HRCs have turned lucrative recently as they are competitively priced against domestic. The landed cost of Japanese HRCs on an exy-Mumbai basis stands discounted by about INR 8,100/t ($99/t) and those of Chinese origin by INR 3,400/t ($42/t). A point to note here is that Chinese mills having BIS certificates can export to India, and will also attract Basic Custom Duty (BCD) and cess. Whereas countries like Japan, South Korea and Vietnam would attract no duties due to the existing free trade agreements (FTAs).

2. Mills yet to quote offers for overseas trades: Indian steel makers are still holding back from quoting offers on the global platform for HRCs. Better at-home realisations and low buying interest in overseas markets are among the lead reasons. Also, there are bid-offer disparities being witnessed in the key export markets of Vietnam, the UAE and Europe.

Also, demand in Vietnam is visibly low and domestic mills there are actively scouting for export opportunities. Moreover, the weakening global HRC prices are also a reason for Indian mills to stay on the sidelines.

There have been no firm offers from mills in the past couple of weeks. Thus, SteelMint's India HRC export index stands unchanged at $518/t (INR 42,303/t) FOB east coast.

3. Buying stays need-based: Domestic buyers continue to procure on urgent-need basis, factoring in the cheaper imported HRCs coming into the country, informed reliable distributor sources. "The chances for trade-level prices to remain under pressure are high at present, but the quantum of decline in the same will be low and gradual," highlighted another source. In addition, demand from the automobile sector is likely to get moderated in December as buyers will want vehicles with the stamping of 2023 and thus sales volumes are likely to come down a bit. This will also impact the allied industries such as fabrication.

Near-term outlook
Trade-level HRC prices are likely to remain under pressure as cheaper alternatives are available globally. However, some respite might come from exports which would ease the inventory pressure on mills in the near term with the removal of the export duty.