India steel index falls to 12-week low; subdued market awaits upturn

• Japanese imports, dull exports scenario keep flats under pressure
  
  
• Long steel inventories idle as projects moves to sidelines
  
  
• Will prices reduce for May sales?
  
  

Morning Brief: The India Steel Composite Index continued its losing streak to close at a 12-week low on 28 April, 2023.

The week's closing saw the index drop 1% to 154.10 points (155.60 points in previous week).

With the mother index showing the way, the India Flat Steel Composite Index also closed down 0.8% w-o-w at 156.30 points (157.6 points) while the India Long Steel Index headed south by a steeper 1.1% to 152 points (153.70) in this week.

Factors bringing the index down

Flats feel import-export pressure

Import worries loom once more: While February and March were inactive, the scene suddenly changed in April with the decline in global HRC offers. SteelMint heard of deals being concluded in the first half of April while some more are on, especially from Japan. A deal was heard concluded for Japanese-origin HRCs a couple of weeks back at around $700/t (INR 57,225/t) CFR India. Meanwhile, further negotiations are under way at around $665/t CFR levels, down $35/t against the last concluded deal. In comparison trade-segment prices, ex-Mumbai are hovering higher at INR 58,500-59,500/t. This has made imports attractive to India end-users, causing mills some worry especially since South Korea, Japan and Vietnam have Free Trade Agreements (FTAs) with India. Russia and China, on the other hand, do not have any such agreement and will have to bear the Basic Custom Duty (BCD) of 7.5% as well as a cess of 10% computed over BCD.

Exports lull: There is a palpable dullness in the exports market, so much so that the SteelMint India HRC export index dropped $10/tonne w-o-w in the latest assessment done on 25 April.

European Union buyers have fallen silent after some amount of restocking. The Middle East was quiet inactive because of the Eid holidays while Vietnam has been avoiding Indian material for months now.

Chinese export offers dropped by a sharp $50/t. Indians were forced to roll over their offers of $780-800/t CFR EU although the buzz is some offers floated were even lower.

Thus, with global prices on the decline, Indian mills are under added pressure where their domestic list prices are concerned.

Longs wait as projects move to sidelines

Projects segment in wait-and-watch mode: The much-anticipated revival in April from the project segment proved to be elusive, much to the disappointment of the mills. Industry circles said projects had done enough restocking in March-end and are now satiated. But, more importantly, they have gone into a wait-and-watch mode to see whether prices fall from here.

Prices being offered to projects are at INR 58,000-59,000/t ($709-721/t) FOR Mumbai - almost similar to trade segment tags - but there are no takers as inventories idle in the yards.

BF-route rebar gets little support from IFs: Trade segment BF route rebar prices fell to their four-month lows by INR 600/t ($7/t) to INR 58,800/t ($719/t), exy-Mumbai, as per SteelMint's assessment on 28 April. This was mainly because induction furnace (IF)-route rebar trade prices remained stable at INR 54,400/t ($665/t) exw-Mumbai during the week under review amid average buying interest. Since IF-route rebar enjoys a domestic market share of 65-70%, primary mills have no choice but to follow the former's price trends.

Raw material prices weaken: Prices of coking coal have been on a decline since the beginning of March. Australian premium hard coking coal (HCC) dropped $25/t w-o-w to $247/t CNF India. Although the price impact will be felt after a lag of 2-3months, the downward sentiment offered little support.

Moreover, iron ore fines prices inched down. India's largest merchant iron ore mining company, NMDC, has decreased list prices of iron ore today, SteelMint learnt from reliable sources. The company has cut prices of DR-CLO by INR 300/t and fines by INR 100/t, effective from 29 Apr'23. Also, SteelMint's weekly Odisha iron ore fines (Fe 62%) index stood at INR 5,600/t ex-mines, inching down by INR 100/t on 29 April 2023 compared to the last assessment on 22 April.

Outlook

Mills have been raising prices since the first week of January till April sales. Overall, prices have increased by around 11% in these last four months. Market participants say sales are very subdued and there is inventory pressure. The buzz is that mills may reduce prices for May sales.

This could perhaps lure buyers back from next month onwards for pre-monsoon procurements.

The 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.

SteelMint 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, SteelMint 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. For details click to view the methodology document.