India steel index falls to 34-week low in lacklustre market
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- W-o-w, however, index remains stable
- Both flats, longs see need-based purchases
- Trend likely to continue into short term
Morning Brief: The India Steel Composite Index fell to a 34-week low on 9 February, 2024. However, on a w-o-w basis, it remained flat at 139.60 points compared to the preceding week's closing of 139.4.
Factors which influenced the index last week
On a w-o-w basis, sentiments remained mainly unaltered.
Prices flat at both mill & trade-levels: In flats, tier-1 mills raised prices in late January for hot rolled (HR) and cold rolled (CR) coils by INR 1,000-1,500/tonne ($12-18/t). However, they also offered discounts of INR 2,000-2,500/t ($24-30/t) for January, which effectively negated the price increase. Thus, effective landed prices in February from mills stood at INR 57,500-58,500/t ($692-704/t) landed for HRCs and at INR 63,000-63,750/t ($759-768/t) for CRCs.
Prices in the traders market, on cue, were stable too. Trade-level benchmark HRCs, ex-Mumbai, hovered at INR 53,500-54,500/t ($644-656/t) as on 6 February 2024.
Cheaper alternatives and need-based buying sentiments got rolled over from the past few week. In fact, these sentiments have kept the market dull for quite a few months now.
Additional HRC supplies weigh on prices: Additional HRC supplies kept prices under pressure. First, NMDC's Nargarnar Integrated Steel Plant (NISP), after getting commissioned in November last year, is already manufacturing and moving around 60,000 t f HRCs into the trader's market. Secondly, JSPL's recently-commissioned hot strip mill at Angul is also readying for supply. Some consignments were already booked while coils had been sent out for open market quality testing in early January and were expected to be commercially available from February itself, as per sources. Thirdly, cheaper imports have been flooding the markets. In January, the price differential between landed HRCs from FTA countries and domestic was around INR 4,000/t, luring end-buyers towards the former.
Export space offers no respite: BigMint's India HRC (SAE 1006) export index remained flat at $599/t FOB (against $600/t FOB east coast India in the previous week). Offers to the Middle East were flat at $630/t FOB while a parcel of 30,000 t was booked for March shipment. Offers to Vietnam also held steady at $610-615/t CFR. Offers from China to both these geographies dipped due to the Lunar holiday lull.
The euro's 1.9% depreciation against the dollar slightly impacted offers to the EU, which fell to $715-720/t CNF Antwerp from $723/t CNF a week ago. High domestic prices and enough inventories are keeping EU demand low.
BF-route rebar prices rise but few takers: In longs, tier-1 mills raised list prices by INR 1,000/t ($12/t) for early February sales to INR 52,000-52,500/t ($626-632/t). Trade segment prices rose a nominal INR 400/t ($5/t) to INR 52,100/t ($628/t). But there were few takers and demand was need-based, which has been leading to inventory pile-up at mills for quite a few months, with volumes rising 8% last month. Infra steel demand has seen a marked slowdown as most projects see completion.
IF rebars range-bound as billet prices dip: IF-route India's induction furnace route finished long steel prices witnessed a mixed price trend with rebar fluctuating by INR 100-600/t ($1-7/t). IF-route rebars were mostly stable at INR 48,100/t ($578/t), exw-Mumbai. Domestic billet prices decreased by INR 100-600/t ($1-7/t) across regions, offering little scope for a price hike. Buying activities were dull amid limited spot trading and need-based procurement. Sellers were compelled to offer attractive discounts to liquidate material. Factors like inventory pressure, raw material price dips, liquidity crunch as well as lifting of previously booked material were a drag on prices.
Outlook
A similar trend may continue into the short term with regard to both flats and longs. In exports, there are expectations of activity picking up in the absence of China.
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.
