India steel index continues to fall in lacklustre market

• BF-route rebars fall further amid sluggish buying
  
  
• Domesic flats prices range-bound, export offers dip
  
  
• Prices may remain range-bound in short term
  
  

Morning Brief: The India Steel Composite Index continued to fall last week, but the pace slowed down. Hence, for the week ended 19 January, 2024, the index closed down a mild -0.4% to 139.9 points against 140.4 points seen in the previous week.

Factors that influenced the index last week

It may be noted both longs and flats moved in a very narrow range with longs dipping -0.44% and flats, by -0.27% w-o-w.

BF-route rebar prices fall further: Trade-level blast furnace (BF)-route rebar prices saw a further INR 500/tonne (t) ($6/t) decline w-o-w. This effectively brought down the prices to a five-month low of INR 51,500/t ($620/t), ex-Mumbai.

Prices fell as buyers continued to do need-based procurements.

In the projects segment, prices remained stable at INR 50,000-50,500/t ($602-608/t), on FOR Mumbai basis amid dull demand.

Slow demand in IF-rebar segment: A key reason for the poor show in the BF route lay in the fact that trade-level prices of induction furnace (IF) rebar remained unchanged at INR 48,600/t ($585/t) w-o-w. The stable prices were also attributed to sluggish trade activities which prompted manufacturers to offer discounts. Trade-level IF rebar prices ruled at INR 48,700/t ($586/t) ex-works Mumbai. Since these command a major 65-70% of the market, BF-route prices are hugely influenced by them.

With the further fall in BF-route prices, the monthly average gap between BF-IF rebars returned to their usual range of INR 3,000-3,500/t ($36-42/t) in the key market of Mumbai.

Cheaper alternatives keep flats stable: Trade-level prices of hot-rolled (HR) and cold-rolled (CR) coils predominantly remained range-bound. HRCs dipped by a mere INR 100/t to INR 54,100/t ($651/t) and CRCs remained static at INR 62,000/t ($746/t).

Flats' prices were influenced by the availability of cheaper domestic alternatives.

HRC export prices lose sheen but EU offers excitement:The export index for HRCs witnessed a slight $5/t decline this week to $600/t FOB, east coast of India. China moved in with alacrity to counter Indian offers in the Vietnamese market. It may be recalled, Indian mills had recently resumed offers in this market after an extended gap.

Middle East demand remained sluggish, rendering offers flat.

The only excitement derived was from the European Union, where offers rose $25/t, driven by a spurt in EU domestic offers amid rising production costs.

But exhausted Q1 quotas from other exporting countries have limited overall imports by EU buyers.

Imports decline December: Imports showed a dip in January, as had been forecasted by SteelMint. Import volumes of bulk HRCs and plates amounted to around 308,000 t in January 2024 on a provisional basis against 530,000 t in December 2023.

Raw material prices: Key steel-making raw material prices, specifically iron ore, remained stable w-o-w, while coking coal prices increased compared to the previous week. SteelMint's weekly Odisha iron ore fines Fe62% index remained unchanged at INR 5,500/t ($66/t) ex-mines. The market exhibited a muted performance last week, with no significant trading activity observed. Market participants remained on the sidelines, exercising caution in material bookings, given the drop in offers in the pellet and sponge iron markets.

Outlook

Prices may remain range-bound in the short term as need-based procurements may persist amid sluggish demand. In exports, even of the EU market sends out positive signals, Vietnam will likely remain a damp squib amid aggressive Chinese offers.

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.

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.