India steel index at near-four-year lows; short term still looks bearish

• Flats on sticky wicket, face liquidity, import bouncers
  
  
• Longs score better amid tight supply in southern India
  
  
• Prices may stay stable or see slight dips in near term
  
  

Morning Brief: Indian steel prices are grovelling at near-four-year lows. On 20 September, the BigMint India Composite Steel Index fell yet another 0.3% to close at 129.60 points, which is close to 11 December 2020's 128.9 points.

The sub-indices fell in tandem w-o-w. Flat steel fell a steeper over 1% and longs by a more nominal 0.46%.

Longs found feet but flats, facing several challenges, fell more steeply.

Factors that impacted the index last week

Flats on a sticky wicket: Flat steel prices, especially of hot rolled coils (HRCs) remained in a bear grip amid lacklustre demand despite the fact that the festive season is round the corner.

Benchmark trade-level HRC prices, ex-Mumbai, closed last week down INR 900/t ($11/t) at INR 47,100/t ($564/t) although cold rolled coil prices bucked the trend somewhat by at least remaining stable at INR 55,900/t ($670/t).

Overall, prices of HRCs and CRCs fell by around INR 1,000/t ($12/t) across regions. Post-reductions, HRCs hovered at INR 47,000-51,000/t ($563-611/t), and CRCs at INR 55,000-60,000/t ($659-719/t).

Where tier-1 mills are concerned, the buzz is that these have already adjusted for September sales in the form of price cuts or discounts of INR 500-1,000/t ($6-12/t) although this could not be confirmed at the time of publishing this report. Several factors are weighing on flats. One, with the fiscal half year closure approaching buyers reined in procurements amid a liquidity strain and resorted to need-based procurement. Retailers, in turn, nursing inventories, also stocked up less, leading to a pile-up across the value chain. Two, the import pressure still remains and how? Cumulative imports touched 0.51 million tonnes till mid-September 2024 against full August's 0.63 mnt and 0.64 mnt in July. However, an additional 0.29 mnt are expected by end- September. India will remain a net steel importer in the July-September quarter as well as in the first half of the current fiscal. Lastly, exports remain a no-show, exerting downward pressure on domestic prices.

Exports remain a no-show: Export offers to Southeast Asia and the Middle East continued to be on hold while those to Europe remained stable w-o-w. However, global sentiments are dull and ongoing anti-dumping investigations from the European Commission have made buyers from here wary of Indian imports.

BF-route rebars see mixed trends: The trade-level blast furnace-route rebar saw some mixed trends. These found some firm footing in the southern region last week because of tight supply. A leading public sector longs manufacturer is currently operating on only one of its three blast furnaces, which is constricting production and thus supply. The mill increased its rebar prices by INR 1,500/t ($18/t) last week. This factor slightly pushed up rebar prices, especially in southern India.

However, overall, benchmark rebar prices fell by INR 600/t ($7/t) to INR 50,000/t ($599/t) ex-Mumbai, minus 18% GST since demand remained weak amid deferred outdoor construction sector activities.

Project segment prices fell slightly by INR 500/t ($6/t) w-o-w to close at 48,500-49,500/t ($581-593/t), ex-Mumbai.

IF mills hike list prices, but trade-level subdued: Induction furnace-route rebars witnessed a slight uptrend across most markets last week. List prices of IF mills rose by INR 500-1,000/t ($6-12/t) amid a slight uptick in buying activity. IF mills had reduced production 20-25% to address the piling inventory, that was seeing an idling time of 12-15 days for a few months now. This calibration also supported the list price hike.

However, trade-level prices fell at a few locations. Ex-Mumbai tags were reduced by INR 400/t ($5/t) to INR 45,200/t ($541/t).

Outlook

Indian steel prices may remain range-bound or see marginal dips in the short term as demand is likely to stay lacklustre for some more time yet. Moreover, global prices are subdued too. The auto sector usually revs up ahead of the festive season and spurs up the flats segment. However, this year, auto makers are sitting on inventories. An extended monsoon is keeping construction dampened.

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.