India steel index dips further w-o-w; but at 6-month high for 5 consecutive weeks

• Both longs, flats feel poll heat, demand stays dull
  
  
• Longs prices may be impacted by increased supply
  
  
• Flats likely to stay range-bound amid imports threat
  
  

Morning Brief: The BigMint India Steel Composite Index dipped further marginally w-o-w when it closed on 31 May, 2024. With this last closing, the index has remained in negative zone for three consecutive weeks. But, it may also be noted, the index has been hovering at a six-month high for around five weeks now, thanks to some pre-election demand pull.

However, for the week ended 31 May, the index slipped a further 0.2% to 145.3 points (145.6). Both the flats and longs indices also showed marginal dips.

What factors influenced the index last week?

BF-route rebars drop as buyers wait and watch: There was a certain stillness in the markets last week ahead of the closure of the poll process on 1 June, 2024. Buyers mostly stayed away, waiting for tier-1 mills' price announcements for June sales for better clarity. Plus, they also avoided making purchases, waiting for the poll results and the formation of a stable government before opting for large-scale purchases. Thirdly, supply issues in rebars eased with the onset of production at a PSU long products major.

As a result BF-route rebar prices dropped by INR 400/tonne ($5/t) to INR 58,000/t ($695/t) w-o-w, ex-Mumbai, minus 18% GST.

Project segment prices dipped slightly by INR 500/t ($6/t) to INR 57,000-57,500/t ($683-689/t).

IF rebars fall amid weak demand: Induction furnace (IF)-route rebar prices fell further by INR 500/t ($6/t) as procurement patterns have turned week from mid-May onwards. Buyers avoided bulk purchases despite the trade discounts offered as here too they awaited the election outcome. As a result, the inventory idling time increased to 8-10 days from the previous 5-7 days. Weakened raw material prices also failed to offer support towards the month-end. Sponge iron prices (PDRI, ex-Raipur), fell 3% w-o-w. The BigMint Raipur billet index remained almost stable w-o-w at INR 44,425/t ($532/t) after rising earlier in the month to INR 44,958/t ($539/t).

With the sharper fall in IF rebar, its gap with the BF route widened to INR 5,000-5,500/t ($60-66/t).

Flat steel prices fall amid election heat: Feeling the election heat, trade-level benchmarked hot rolled coil (HRC) prices declined by INR 500/t ($6/t) to INR 53,400-56,500/t ($640-677/t) ex-Mumbai, w-o-w. Cold rolled coil (CRC) prices also fell but by a lesser INR 300/t ($4/t) to INR 60,600/t ($726/t).

As with rebars, in flats too, buyers moved to the sidelines, awaiting announcements of tier-1 mills for June sales for price clarity. Demand was overall subdued, with buyers resorting to small-parcel buys and that too at prices on the lower end of the spectrum.

Indian mills continue to hold export offers: The exports front continued to remain silent as mills withheld offers to Southeast Asia and the Middle East for yet another week. Chinese offers to these competing geographies remained stable w-o-w amid an overall lack of demand from both.

The European Union market was equally dull and Indian mills did not make any headway there for yet another week. This is mainly because EU domestic mills are aggressively matching import prices in an already bleak market.

Outlook

The near term may throw up a mixed trend. Mills may keep flats prices range-bound for June sales since imports are beginning to rear their head again. A 40,000-t cargo is expected from Vietnam in July at $592-596/t levels, a price band definitely lower than the current domestic trade-level range.

Longs may experience a slight dip amid an increase in supply across all grades.

In exports, some restocking is anticipated from Europe mid-June onwards, ahead of the onset of the summer vacationing season there.

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.