India steel index at six-month high for 2nd consecutive week; short term looks range-bound

• Buyers resist current finished price levels
  
  
• Longs dip marginally amid slack demand
  
  
• Flats see low buying despite supply shortage
  
  

Morning Brief: After a six-week positive run, the BigMint India Steel Composite Index moved into a marginally negative zone for the week ended 17 May 2024, when it closed 0.1% down at 145.9 points (146.1). But, still, the index retained its 6-month high level for the second consecutive week. Similar levels were last seen on 3 November, 2023.

Flats held firm w-o-w, while longs dipped slightly.

Factors which impacted the index last week

Trade-level BF rebar sees price resistance: Repeated interim hikes amid the lesser supplies allowed trade-level blast furnace-route rebar prices to climb to nearly one-year highs in May. Price trends were somewhat mixed last week. But, overall, ex-Mumbai prices dipped slightly last week by INR 100/t ($1/t) to INR 58,700/t ($705/t) amid a slight buyer resistance. Buying was slow despite the shortages in certain sizes and grades.

Project segment prices remained static w-o-w at INR 57,500-58,000/t ($690-696/t).

However, prices avoided any sharp drop essentially because the shortages persisted in the market while coking coal supply was impacted due to strikes at Gangavaram Port, starting mid-April. However, this issue will be resolved soon, as per information available.

IF rebars dip marginally amid dull demand: India's induction furnace (IF)-route finished long steel witnessed slight variations w-o-w amid fluctuating raw material prices. But, overall, trade-level prices also dropped by INR 100/t ($1/t) w-o-w to around INR 53,200/t ($639/t) exw-Mumbai. Buyers avoided bulk bookings and opted mainly for modest volumes, taking into consideration lower demand amid the election process under way in the country and the ensuing tight liquidity. Suppliers offered discounts to boost sales. However, buyers remained cautious and awaited further clarity on market directions.

The inventory idling period has widened to 8-10 days now against 6-8 days in the previous month.

The gap between BF-IF rebars widened to around INR 5,500-6,000/t ($66-72/t) in May as compared to INR 4,000-4,500/t ($48-54/t) in April because of the interim price hikes in the former in the last couple of months.

Trade-level HRC prices decline in slow market: Trade-level prices of hot rolled coils (HRC) declined by up to INR 600/t ($7/t) to INR 53,900-56,500/t ($647-678/t) across key markets. However, cold rolled (CR) coil prices moved up in a reversing trend by up to INR 600/t ($7/t) to INR 61,000-63,500/t ($732-762/t). The uptrend in the latter helped to keep flats slightly supported.

HRCs fell due to continued weak demand even as suppliers tried to justify the higher offers with supply constraints which are a spin-off of the recent maintenance schedules. Buyers, as with longs, also resisted the current prices, avoided bulk bookings, opting for need-based procurements only.

Exports offer scant support: Exports continued to be a laggard. Data reveals India's steel exports hit a five-month low in April. Meanwhile, Indian offers to the Middle East and Southeast Asia continued to remain on hold for four consecutive weeks. Chinese offers to the ME fell but remained range-bound for Vietnam last week.

EU also fell of the radar of Indian mills for the second week in a row amid tepid demand.

Outlook

Prices may remain range-bound even if they do not fall from the current levels because of the market resistance. Moreover, many feel, further hikes may impel end-users to explore import options, which is highly undesirable for domestic mills. With China still focused on higher exports, stakes are stacked somewhat against Indian suppliers, especially of flats.

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.