India steel index continues to slide w-o-w; flats face greater challenges

• BF mills, trade segment increase rebar prices
  
  
• Imports, supply glut keep flats under pressure
  
  
• Prices may rise in short term for long steels
  
  

Morning Brief: The slide in steel prices continued into September, as indicated by the BigMint India Composite Steel Index. It lost another 0.6% to end the week at 131.2 points on 6 September, 2024. The flat steel sub-index fell 1.05% but longs remained flat w-o-w.

Factors that influenced the index last week

Tier-1 mills raise rebar prices: The longs index remained slightly supported as tier-1 mills raised rebar prices by up to INR 500-1,000/t ($6-12/t) for early September sales. Post-revision, list prices rose to INR 50,500-51,500/t ($601-613/t) on landed basis. It may be mentioned that mills had raised list prices by up to INR 1,000/t ($12/t) in end-August as well.

Trade-level, project segment rebar prices up: On cue, trade-level blast furnace-route rebars also went up, by INR 300/t ($4/t) w-o-w to INR 50,600/t ($603/t), ex-Mumbai, exclusive of the 18% GST. However, demand continued to remain dull. In the project segment, tags rose by INR 1,000/t ($12/t) w-o-w to INR 49,000-50,000/t FOR ($583-595/t), possibly in anticipation of a receding monsoon, which spells resumption in construction activities.

IF rebars flat amid rising inventory: Induction furnace rebars, on the other hand, remained subdued and flat w-o-w at INR 45,700/t ($544/t). On a m-o-m basis, these fell by INR 1,400/t ($17/t) in end-August. Previously booked material also took time to move, compounding the inventory scenario. Thus, mills cut output by 20-25% and offered discounts amid slack demand and rising inventories which experienced an idling time of 12-15 days.

Flats weighed down by imports, excess supplies: Flats were not so lucky. Some tier-1 mills dropped their benchmark hot rolled (HR) and cold rolled (CR) coil prices by INR 1,000-2,000/t ($12-24/t) for September sales. Post-decline, HRC prices hovered at INR 50,000-51,000 ($595-607/t) while CRCs stood at INR 55,500-57,500/t ($661-685/t). Mills are labouring under a double whammy. One reason for the price drop was imported HRCs and plates. As per vessel line-up data, imported HRC and plates touched 636,651 tonnes in July, dropping negligibly to 627,428 tonnes in August. An additional 331,092 tonnes are expected in the first half of September.

Secondly, excess domestic supplies are also a burden amid subdued demand.

Exports remain a no-show amid dumping probe: The third whammy for flats is export, or the lack of it. Offers to the Middle East and Vietnam continued to remain on hold while those to Europe dropped by $10/t w-o-w as indicated by a recent deal. Current offers are hovering at $605-610/t FOB East Coast of India. There are apprehensions that the EU and Vietnam anti-dumping probes into HRC imports from countries, including India, may dry up future export prospects.

Outlook

Prices of longs may look up in the near term as the monsoon is expected to recede by end-September and the pent-up construction sector demand will unleash.

In flats, however, mills may consider increasing prices if the government raises import tariffs. Anti-dumping investigations are under way to stall imports from Vietnam, which may also augur well for flats in the medium to long term.

But exports will remain under pressure amid the Chinese surge in global steel markets.

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