India steel composite index moves south as prices weaken further

• IF-route rebar prices show w-o-w decline
  
  
• HRC trade & export offers feel pressure
  
  
• Subdued global sentiments weigh on prices
  
  

Morning Brief: BigMint's India steel composite index, a barometer of the domestic steel market, edged lower by 0.5% w-o-w to 138 points from 138.7 points last week, as continued weak sentiments persisted in the steel market.

The composite flats sub-index slipped 0.4% w-o-w following a 0.2% decline last week, while the longs index contracted again by 0.5% after a brief phase of marginal recovery since end-February.

Factors affecting prices

Flat steel prices under pressure: Although domestic trade-level HRC and CRC prices remained range-bound in most markets, prices fell by INR 900-1,200/t ($11-15/t) w-o-w in some regions in the western and southern parts of the country. Limited trading activity continues to plague the market and selling pressure is accumulating ahead of the financial year-end. BigMint's benchmark assessment (bi-weekly) for HRC (IS2062, Gr E250, 2.5-8mm) remained stable at INR 52,700/t ($636/t) exy-Mumbai on 12 March. Prices remained stable despite a weak environment mainly due to good export volumes.

Export offers, global prices weaken: HRC exports picked up by around 40% m-o-m in February, while imports of flat steel fell by 30% m-o-m in February. However, domestic prices still do not find support because global prices are plummeting. India's HRC (SAE 1006) export index (for the Middle East and Vietnam) has inched down by $3/t w-o-w while offers for the EU have dropped $5/t. Chinese HRC offers for both the Middle East and Vietnam have decreased w-o-w and key mills have announced price cuts for April. So, domestic prices are not getting adequate support.

BF-route rebar rises slightly as stocks deplete: A State-owned tier-1 mill announce an interim hike of INR 500/t ($6/t) in rebar list prices and this could encourage others to follow suit. It may be recalled primary mills had rolled over their prices for early March sales. Post-hike, trade-level rebar inched up by INR 100/t ($1/t) to INR 52,000/t ($627/t). Project segment prices too upped slightly by INR 500/t ($6/t) to INR 50,000-50500/t ($603-609/t).

The slight price hike in the BF route was encouraged by the fact that inventories with tier-1 mills have touched a three-month low thanks to the production cuts. This factor also helped the keep the composite index supported and not fall further than a mere 0.5% w-o-w.

IF rebar prices decline: Long steel prices produced via the IF route decreased w-o-w. Rebar prices fell by up to INR 1,100/t ($13/t) w-o-w, as per BigMint assessment. Weak buying enquiries at higher offers compelled sellers to offer discounts. As adequate material had already been booked over the past few weeks, buyers resorted to need-based buying. Steel billet prices, too, decreased by over INR 800/t ($10/t) w-o-w in central India, while sponge iron prices edged lower. IF rebar producers have a share of over 65% of the domestic market.

Outlook

The momentum of infrastructure and commercial construction activity is likely to slow down significantly with the announcement of dates of the upcoming general elections and the enforcement of the model code of conduct. Therefore, construction steel prices are likely to remain capped. On the other hand, export prices remain weak (despite growth in volumes) on weak Chinese prices and higher steel exports in 2024, although India's imports have decreased.

Global iron ore and scrap prices have weakened and so have domestic prices of metallic, thereby exerting pressure on steel prices. So, the outlook does not appear promising in the short term.

India Steel Composite Index

The India Steel Composite Index is assessed on a weekly basis, every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.

BigMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, BigMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India.