India steel index dips for 9th straight week; longs under more pressure

• BF-IF route rebar prices fall sharply amid sluggish demand
  
  
• Flats see uptick in trade-level prices, export offers range-bound
  
  
• Outlook seems volatile amid mixed cues
  
  

Morning Brief: The India Steel Composite Index ended 0.6% down at 145.20 points (146 points last week) for the week ending 16 June, 2023. However, it may be noted that the downward streak continued for the ninth straight week.

However, unlike in the previous week, it was the longs segment that impacted the mother index more. The India Long Steel Composite index lost a deeper 2.40% at 143.50 points (144.10). The India Flat Steel Composite Index fell a lesser 0.74% w-o-w to touch 147.10 points (148.10 points).

Factors influencing the index this week

Longs

BF-route rebar prices plunge: Trade-level prices of blast furnace-route rebars fell to their 20-month lows in the week under review. Exy-Mumbai benchmark prices eroded by INR 900/tonne ($11/t) INR 53,500/t ($653/t). These levels were last seen around October 2021. Prices fell due to two reasons: One was the drop in induction furnace route rebar prices. Since IFs dominate the rebar market with 65-70% share, any price movement here impacts BF-route material easily.

Two, demand has been sluggish. Project developers have been continuing with their need-based procurement trend. Thus, offers to this segment plunged INR 1,000/t w-o-w to INR 52,500-53,000/t ($641-647/t) FOR Mumbai.

IF-route rebar prices fall: Induction furnace-route rebar prices fell by INR 400/t ($5/6) w-o-w to INR 51,100/t ($624/t) exw-Mumbai on the back of sluggish demand. Spot buyers resisted buying in volumes in a volatile market. That apart, mills operated at full capacity utilization which increased supply in the market, leading to the price fall.

Weak global cues: Globally, demand for rebar is weak because limited housing and infrastructure projects are getting off the ground. Thus, mills in the EU, UK, and EU are lowering their domestic prices to woo buyers despite the squeezed margins. Inflation, high lending rates and lower spending power are impacting demand.

Flats

Trade-level HRC prices edge up: A slight uptick in trade-level hot rolled coil prices, coupled with a marginal dip in the export index helped to keep the flats segment a little steady. Trade-level prices actually inched up INR 300/t w-o-w as many felt larger mills' prices will not fall from the current levels after they effected a steep INR 2,000-3,750/t reduction for June sales.

Export offers remain range-bound: Flats fell a little less because mills tried to keep their export offers range-bound last week, dropping these by a mere $4/t. Thus, SteelMint's HRC export index, after the reduction, hovered at $566/t FOB east coast.

Mills nipped offers to the Middle East by $5/t to $600-605/t because of sluggish demand and also because China's offers to this region fell by $15/t.

Indian offers to Europe remained flat w-o-w at $645-650/t as western buyers stayed away, awaiting further fall in their domestic prices.

Chinese export offers to Vietnam rise: China's export offers to Vietnam are a huge market influencer. Last week, offers rose $10/t on the back of the spike in Chinese steel futures. It may be recalled Chinese Shanghai Futures Exchange October contract prices rose by RMB 102/t ($14/t) in the preceding week on expectation of further stimulus measures in China.

Outlook

The market may stay volatile in the short term, influenced by global and domestic factors. Chinese prices are see-sawing while global demand is down. Some feel Indian domestic prices may not fall from their current levels. But the monsoon is an off-season and may just influence pricing patterns in the short term. So, even if mills feel reluctant to further lower prices, there may not be a spike.