India steel index falls to 11-week low; rains dampen longs, flats feel import heat

• IF mills see slight demand upturn w-o-w
  
  
• Flats remain listless in sluggish market
  
  
• Short term likely to remain lacklustre
  
  

Morning Brief: The BigMint India Steel Composite Index dropped further to close at an 11-week low. It has been falling for three consecutive weeks now and slight bearish sentiments are gripping the market with the onset of the monsoon rains. On 28 June, it ended down by 0.9% w-o-w at 141.9 points (143.1).

Both the longs and flats indices fell w-o-w, the former by over 1%.

Factors that pressured down the index last week

Trade-level blast furnace rebar sees sharp fall: Trade-level blast furnace rebar prices fell a steep INR 800-1,200/tonne (t) ($10-14/t) across regions last week. The benchmarked, ex-Mumbai price fell by INR 1,000/t to INR 56,300/t ($675/t), minus the 18% GST. Project segment prices, on cue, fell by around INR 500/t ($6/t) to INR 55,500-56,500/t ($666-678/t).

Prices fell as demand continued to be dull. There is a slowdown in construction with the advent of the rainy season. Buyers moved to the side-lines in anticipation of further price falls. Plus, they are waiting for announcements on July list prices from the larger mills for price clarity.

IF mills see slight improvement in buying: Trading in India's induction furnace route (IF) finished long steel market improved marginally last week as buyers procured material thinking prices had bottomed out, after hitting a three-month low. However, w-o-w, prices declined further by INR 700/t ($8/t) to INR 48,900/t ($587/t), ex-Mumbai. Last week, sellers offered attractive discounts but firmed up prices once they achieved moderate booking levels.

Despite the active buying last week, IF mills are experiencing an extended weak demand period. Steadily falling IF prices distended the gap with BF rebars to INR 6,500-7,000/t ($78-84/t) against INR 5,000-5,500/t ($60-66/t) in the previous month.

Flats range-bound amid imports pressure: Benchmarked trade-level hot rolled coil prices, ex-Mumbai, remained stable at INR 53,800/t ($645/t) w-o-w but cold rolled coils (CRC) slid slightly by INR 500/t ($6/t) to INR 59,800/t ($717/t). Across India, HRC and CRC prices were stable, hovering in a range of INR 52,400-56,500/t ($629-678/t) and INR 58,000-63,400/t ($696-761/t) respectively.

Cheaper imports are becoming a huge challenge for the domestic mills. In fact, India is set to become a net importer of steel in the first quarter (April-June, 2024). Import bookings have been consistently higher than exports in these three months. Cumulatively, in Q1FY'25 (considering provisional numbers for June), imports are slated to rise to 1.95 mnt compared to 1.51 mnt of exports. Resultantly, demand pressure is further mounting on mills.

Export offers remain on hold: Mills held back their export offers to the Middle East and Southeast Asia for yet another week. Chinese offer to the Middle East and Vietnam dropped a further $5/t CFR w-o-w. Middle East buyers returned after Eid. But procurements from both geographies have been low as buyers wait and watch for further price falls amid the decline in SHFE futures. Indian mills have held their offers for May-June.

Raw materials fail to offer support: Unsupportive raw material prices made finished prices further shaky last week. The Odisha iron ore fines index dropped to a month's low and w-o-w by INR 500/t ($6/t) to INR 4,800/t ($58/t) ex-mines. Coking coal (Australian premium hard CC) eroded by $18/t to $256/t CNF Paradip amid ample supplies and dull steel demand.

For IFs, the Raipur billet index dipped 4% and sponge by 3%, w-o-w.

Outlook

Prices may continue to remain depressed. IF rebars may have bottomed out and not fall from here, but, on the other hand, market conditions are not too supportive. In flats, the buzz is that flats may see a slight dip amid the imports pressure.

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.