India steel index at record lows for three consecutive weeks. Flats more under pressure

• Long steel prices may have bottomed out
  
  
• Imports, exports, excess supplies test flats
  
  
• IF rebar fares better, sees marginal uptick
  
  

Morning Brief: This is the third week in a row that the India Composite Steel Index has been hovering at three-year lows. Last week, it closed at 138.50 points compared to 138.90 seen in the preceding week. Overall, the index has been moving in a highly narrow range. The closing on 1 March, 2024 was nearest to136.8 points seen on 26 March, 2021.

Factors keeping index range-bound

Longs

Trade-level BF rebar stable amid weak demand: Trade-level blast furnace-route rebar prices remained stable w-o-w at INR 51,600/tonne ($623/t). Project segment prices too were stable w-o-w at INR 49,500-50,000/t ($597-604/t) but fell INR 500/t ($6/t) m-o-m.

Demand continued to remain weak while distributors were keen to destock amid the persistent liquidity crunch.

Production cuts keep prices supported: Mills opted for production cuts in February to restore the supply-demand imbalance. This helped to deplete inventories, which had piled up to 600,000 tonnes in January. February saw stockpiles falling by 8%, reducing total inventory to around 550,000 t which helped to keep prices range-bound at least, instead of falling.

Moderate buying in IF segment keeps prices supported: India's induction furnace long steel prices witnessed a mixed trend across regions. Trading was slow at the start of the week but picked up later as buyers booked material in moderate quantities. But, overall, demand was slightly better in this segment with mills holding sufficient orders which kept prices supported.

Ex-Mumbai trade-level prices rose by INR 300/t ($4/t) overall to INR 48,750/t ($588/t). Improved buying and production calibration reduced the inventory idling time to 7 days from the usual 10-15 days.

Raw material prices mixed: BigMint's weekly Odisha iron ore fines Fe62% index was stable m-o-m at INR 5,675/t ($68/t) ex-mines. But premium HCC coal prices, CFR India, were higher in Q3 (October-December, 2023) which are impacting tier-1 mills' production costs in Q4 (January-March, 2024) since the fuel's impact is felt at a three-month lag.

Flats

Excess supply, imports continue to pressure flats: Flats were more on the backfoot last week, compared to longs. Trade-level HRC prices, ex-Mumbai, fell INR 250/t ($3/t) w-o-w and by INR 300/t ($4/t) m-o-m to around INR 54,000/t ($652/t). Excess supply, and imports continued to give tier-1 mills reasons to worry. Bulk HRC and plates imports declined to over 400,000 tonnes from 660,000-plus in January since no new fresh cargoes were booked from late last year. Mills are hoping volumes will taper off in the short to medium term.

Exports a no-show: Weak global steel market sentiments continue to prevail, impacting exports offers. BigMint's HRC export index inched down by $1/t w-o-w. Offers to the European Union (EU) fell $10-15/t CFR. EU buyers have moved to the side-lines on lack of clarity on quotas for Q2 (April-June, 2024).

Quotes to the Middle East were down by around $5/t CFR. Vietnam, a key market that also sets export prices, saw a key domestic mill cutting offers by $45/t CIF HCMC for April shipments.

Outlook

Longs prices for tier-1 mills may have bottomed out and are unlikely to fall from their current levels. In the IF segment, marginal fluctuations may be observed in the near term, depending upon the movement in billet and sponge prices and new order flows.

But flats are under greater pressure as both home and away demand is likely to remain lacklustre for some more time.

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.