India steel index back in positive zone after 3 weeks, flats close marginally up

• Tier-1 mills hike list prices of longs, flats for June
  
  
• Trade-level prices remain range-bound w-o-w
  
  
• IF mills feel inventory pressure amid dull demand
  
  

Morning Brief: The BigMint India Steel Composite Index ricocheted back into positive zone after three consecutive weeks of declines.

On 7 June, the index closed 0.2% up w-o-w at 145.6 points against 145.3 seen in the preceding week, regaining the level seen two weeks back. Although the long steel index remained flat w-o-w, flat steel prices closed marginally higher.

Factors that impacted the index last week

BF mills raise rebar prices but market uncertain: Some Indian tier-1 mills raised list prices of (blast furnace-route) rebars by INR 500-1,000/tonne ($6-12/t) for early June sales. However, one private mill in particular, rolled over its prices. Post hike, the prices hovered at INR 58,500-59,500/t ($700-712/t).

On cue, trade-level BF rebars also rose, but by a mere INR 100/t ($1/t) to INR 58,100/t ($670/t) exy-Mumbai, minus the 18% GST.

In the projects segment, prices were more or less stable at INR 57,000-58,000/t ($682-694/t) FOR Mumbai.

Buyers remained in a state of uncertainty last week, with the election results failing to throw up definite trends, pointing to a coalition government. Thus, buying was tepid and projects segment continued to sustain its need-based procurement trend.

IF rebar prices fall amid tepid demand: Buyers in this space exhibited the same sense of uncertainty that gripped the BF segment. Prices fell by INR 500/t ($6/t) to INR 52,100/t ($624/t). The decline in IF rebar balanced out the slight increase in BF rebar, keeping the longs index flat w-o-w.

Subdued buying interest has prevailed since the last few weeks as minimal movement was observed in the spot market amid bid-offer disparity. This has led to rise in inventory levels of 10-15 days at mills across regions. Sellers offered discounts but buyers resorted to need-based procurements.

Tier-1 mills raise prices, but trade-level offers flat: In flats, some tier-1 mills raised list prices by INR 500-1,100/t ($6-13/t). Post-hike, benchmark hot rolled coil (HRC) prices stood at INR 54,200-55,750/t ($649-668/t) and cold rolled coils at INR 59,800-62,250/t ($716-745/t), excluding 18% GST.

Trade-level HRC prices, ex-Mumbai, however, remained stable at INR 53,900/t ($645/t).

Demand continued to be sluggish as buyers resisted the price hikes.

Exports continue to remain dull: Indian mills held back their offers to Southeast Asia and Vietnam for yet another week. Mills remained focused on the domestic market where realisations were higher compared to export offers. Global demand continued to remain subdued. The fall in Chinese steel futures also pointed to a dull demand environment.

Outlook

HRC imports have edged up which can give Indian mills some jitters and pressure down prices, or at least keep them at their current levels instead of raising them, especially since buyers are showing resistance. In longs too, prices may remain range-bound amid dull demand. Exports may continue to remain subdued in the short term, as the EU is not very exciting despite domestic prices there remaining stable and the European Commission announcing a 15% import cap on sellers that exceed their HRC quotas.

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.