India: Sluggish demand pulls down HR plate prices w-o-w

Domestic hot-rolled (HR) plate prices continued to remain on the lower side for the third consecutive week. For week 36 (30 Aug-4 Sep'21), SteelMint's assessment for benchmark HR-plates (IS 2062/E250, 5-10 mm) stands at around INR 64,500-65,500/tonne (t) compared with INR 65,000-66,000/t exy-Mumbai a week ago. The prices mentioned above are exclusive of GST @18%.

Factors keeping prices under pressure-

1. Poor downstream industrial demand: SteelMint, in conversation with a trader based in North India, learned that most downstream industries are delaying their purchases owing to higher prices. The heavy machinery and fabrication industry are yet to see any improvement amid a low end-user demand base.

"Downstream industrial consumers in regions like Pune and Nashik have been sitting tight for some time now. They have delayed procurements in anticipation of further correction in prices and a possibility of mills reducing their offers," the trader said.

2. Poor sales performance of farm equipment makers: VST Tillers Tractors reported its monthly tractors and tillers sales at 3,336 units in August, down by 24% as against 4,397 units in July.

Escorts Ltd reported its monthly tractor sales at 4,920 units in August, down 19% as against 6,055 units seen a month ago. Meanwhile, domestic sales of Mahindra & Mahindra FES fell by 22% to 19,997 units last month compared with 25,769 units a month back. This, in turn, weighed on demand for plates from this segment.

3. Slump in government spending: There has been a massive drop seen on a quarterly basis in the government spending in various steel consuming segments in the Apr-Jun'21 quarter. As per the Project Today's report, investments from both central and state governments reeled under the ferocity of the second wave with a whopping 77% q-o-q drop in the manufacturing sector, to just INR 481 crores in Q1FY'22 while that for infrastructure slipped by 48% to INR 69,343 crores.

China's heavy plates export offers drop further
This week, export offers for Chinese heavy plates moved down further due to mute trade along with the likely effects of port congestion in China.

Current offers stand in the range of $910-920/t FoB China, down $5/t compared with $915-925/t FoB a week ago.

Outlook-
It is likely that the market prices of HR plates may continue the downward trajectory with restrained buying. Most participants say that market demand will show some green shoots by the end of September with fading monsoon concerns and a likelihood of new project announcements in infrastructure and construction sectors.