India steel index continues to move in narrow range. Flats still under pressure

• IF rebar finds support in demand, raw material prices
  
  
• Imports, lower exports worry flat steel-makers
  
  
• Short-term outlook mixed, trend likely to persist
  
  

Morning Brief: The India Composite Steel Index continued to ricochet back and forth in an extremely narrow range and last week was no exception. It closed at 138.70 points compared to 138.50 seen in the preceding week, up a negligible 0.1% w-o-w. Overall, the index has been hovering at near-about three-year lows for many weeks now. Similar levels were last seen in the second and third weeks of January 2021.

Factors keeping index range-bound

Data also revealed that flats continued to be more under pressure although longs performed merely a shade better.

Tier-1 mills roll over rebar list prices: Keeping the current subdued market dynamics in mind, tier-1 mills rolled over their list prices of rebar for early March deliveries. As a result, landed prices remained at INR 52,000-53,000/t ($628-640/t). Trade-level rebar prices rose by INR 300/t ($4/t) w-o-w to INR 51,900/t ($627/t) exy-Mumbai.

Project segment prices seem to have bottomed out and are inert at INR 49,500-50,000/t ($598-604/t). The overall flatness in rebar stemmed from the fact that buying was very need-based. Infrastructure investments have slowed down ahead of the elections this year. Plus, there are liquidity issues this being a financial year-end.

The production cuts that mills undertook in February did not allow rebar prices to fall further as the supply-demand mismatch was corrected to some extent. It may be recalled, inventories had climbed up by 600,000 tonnes (t) in January. The production cuts allowed the same to reduce by 80,000-100,000 t in February.

IF rebars see moderate demand, cost push: On the other hand, the induction furnace segment rebar received both buying support and raw material cost push which helped prices to recoup slightly to INR 49,500/t ($598/t) against the previous week's INR 48,750/t ($589/t). Domestic billet prices increased by INR 200-950/t ($2-11/t) across regions while sponge iron prices in almost all key locations rose by INR 50-800/t ($0.60-10/t. Both these raw materials saw moderate uptick in demand which supported the price hikes.

Tier-1 mills may roll over flats' prices: Flats continued to labour under the pressure of weak demand and low trade volumes. As a result, the market buzz was tier-1 mills could roll over their end-February list prices for March deliveries. If so, benchmark HRC prices will remain stable at INR 54,500-56,000/t ($658-677/t) and CRCs, at INR 59,000-62,000/t ($712-749/t). Apart from tepid demand, distributors are awaiting clarity on the discounts for February before destocking.

Imports continue to worry mills: The price dullness was also spurred by the surge in import volumes of bulk HRCs and plates. February volumes rose a sizeable 40% in February m-o-m to 0.64 mnt and March volumes have already touched 0.22 mnt.

Export offers fall further: The India HRC export index inched down w-o-w as offers to the Middle East and Vietnam fell further by $5/t and those to the European Union by $15/t. Competitive Chinese and Vietnamese offers continued to give Indian mills a run for their money.

Outlook

The short-term outlook may continue to be somewhat mixed as with the last few weeks. Longs prices may have bottomed out and will not possibly fall any further. At best, these may remain flat or rise slightly.

Flat steel may yet feel some pressure as both domestic and overseas demand will likely remain dull in the near future.

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.