India steel index at 3-month high, longs look bullish

• Fresh govt project announcement buzz keeps longs excited
  
  
• Flats may see exports uptick as EU buyers return
  
  
• Further price hikes on the cards?
  
  

Morning Brief: The India Steel Composite Index closed at a three-month high for the week ended 1 September, 2023. It was up 1.7% w-o-w at 146.90 points against its previous close of 144.40. Similar levels were last seen on 2 June, 2023.

Bringing cheer to the industry, both flats and longs indices closed higher too.

The India Long Steel Composite Index performed rather well after a protracted bad show. It not only remained positive for three weeks in a row, but on 1 September, closed 2.63% higher at 144.40 points (140.70).

The India Flat Steel Composite Index, however, closed up a more sedate 0.88% w-o-w to 149.50 points (148.20).

Factors that influenced the index last week

Longs

Tier-1 mills, traders lift rebar prices on cue from IFs: Trade-level blast furnace (BF)-route rebar prices rose INR 2,000-3,000/tonne (t) ($24-36/t) w-o-w across regions. This hike came close on the heels of the tier-1 mills raising their rebar list prices by INR 1,500-2000/t ($18-24/t) earlier in the week. The trade-level decision came on the back of the increase in induction furnace (IF) rebar prices which narrowed the gap with BF material to INR 2,000-2,500/t ($24-30/t) in August against INR 4,000-4,500/t ($48-54/t) in the preceding month. Since IFs enjoys almost 65% of the rebar market, a hike in their offers, by default, pulls up BF-grade prices too to maintain the spread.

Trade segment prices, post-hike, hovered at INR 54,200/t ($655/t), exy-Mumbai, excluding 18% GST. BF-grade, ex-Mumbai prices were at INR 54,200/t ($655/t) against INR 52,000/t ($629/t) seen in the previous week.

On cue, projects segment rebar prices rose by INR 2,500/t to INR 52,500-53,000/t ($632-641/t) FOR Mumbai w-o-w.

IFs raise prices on good demand: Induction furnace (IF)-route rebar prices rose by INR 1,500/t w-o-w to INR 51,400/t ($621/t) exw-Mumbai. Current prices are at INR 51,600/t ($624/t) exw-Mumbai. Prices increased amid moderate demand for finished steel and support from raw material prices. Bullish sentiments and healthy booking volumes characterised last week as the monsoon enters its last lap.

Raw materials offer support: IFs raised offers as some raw materials prices showed an uptrend. Billet prices sharply increased by INR 500-2,000/t ($6-24/t), with a major hike of INR 1,500-2,000/t seen in southern India. Similarly, sponge iron prices also rose INR 300-1,200/t ($4-15/t), with the highest increase of INR 1,100-1,200/t ($13-15/t) seen in Raigarh and Rourkela w-o-w.

Iron ore, however, inched up w-o-w. SteelMint's Odisha iron ore fines Fe62% index stood at INR 4,500/t ($54/t) ex-mines, as on 02 September.

Flats

Trade-level flats prices rise on demand uptick: Trade-level prices of finished flat products increased by around INR 500-1,000/t ($6-12/t) across markets. The increase was steeper for hot rolled coils (HRCs) and cold rolled coils (CRCs) compared to other products. Pre-painted galvanised iron (PPGI) and bare galvalume (BGL) were largely stable.

"Trade activities have shown a slight improvement post-Independence Day holidays," said a source.

Exports still slow: On the exports front, SteelMint's India HRC (SAE1006) export index edged up by $10/t to $580/t FOB east coast. Higher prices were quoted for Middle East which pushed up the export index marginally. Trade activities are still slow. Meanwhile, a cargo of HRCs (SS275, 3mm) was offered at $690-695/t CFR Antwerp, Europe. The market remained lacklustre but activities may improve in the upcoming week with buyers resuming work post-summer closure.

Outlook

There may be a further uptick in prices as mills sense a demand uptrend, especially in longs. The buzz is that the government may announce a slew of new infrastructure projects while some, which had been held up because of the monsoons, may resume soon and need to be closed in 4-5 months. This triggered longs procurement. That apart, further buying confidence is building on notions that rain in September will not be as heavy as seen in July-August. Thus, construction will likely get a fillip in the current month.

In flats, the rumour is, tier-1 mills may opt for a hike of INR 1,000-1,500/t ($12-18/t) for September sales. "Thus, distributors and retailers are quoting higher," informed a source. But others aver that only 50% of the hike in flats can be absorbed by the market.

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.

SteelMint 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, SteelMint 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.