India steel index flat in lackluster market. Will demand pick up end-April?

• Subdued domestic and export demand impacts flats
  
  
• Projects extend silence, longs face price, inventory pressure
  
  
• Market expects demand rebound post-Eid
  
  

Morning Brief: The India Steel Composite Index remained flat, closing at 156.40 points (156.50 points in previous week) for the week ended 14 April, 2023.

The India Flat Steel Composite Index also closed stable w-o-w at 158.3 points (158.1 points) while the India Long Steel Index edged down 0.3% to 154.50 (154.90) in this period.

In short, there was nothing to write home about this market, this week.

Factors keeping the index flat

a) Exports a no-show, domestic demand down for flats

1. Domestic demand remains sluggish: Primary mills had hiked the list prices of hot rolled and cold rolled coils by INR 1,000/tonne (t) in March-end for April sales but remained quiet in the week under review. The market did not show any resistance to this hike but domestic demand remained elusive, belying expectations of a rebound. Many said the fiscal year-end blues are continuing "where account books are undergoing reconciliation and liquidity is still tight". Others said the Index for Industrial Production remained almost flat m-o-m in January while the Purchasing Managers Index showed an equally sluggish m-o-m growth in March, indicating that consumption is not picking up significantly.

2. Exports a no-show: Although Indian mills' export offers to the European Union stayed firm at $830-840/t FOB, the market was closed because of the Good Friday and Easter holidays. That apart, offers to the UAE fell by $11/t w-o-w while Vietnam is still silent even as Chinese mills lured with offers at $640-650/t CFR while position cargoes were aggressive at $610/t where Vietnam's domestic offers hovered at $732/t CIF. Dull exports scenario weighed on domestic prices too.

a) Sluggish projects, global billets scenario impact longs

1. Project segment extends silence: Projects segment extended its silence for yet another week as many of the companies are still reconciling their account books. A source reminded that this is merely the second week of the new fiscal and projects are still taking it easy, being busy with their balance sheets. Mills, on their part, are aware that this is a slow period and not pushing aggressively for sale either.

The BF-route rebar offers to the project segments are hovering at INR 59,000-60,000/tonne (t) but sources inform SteelMint that mills are, in reality, quoting even lower, or "offering quantity-based discounts" as there are inventory pressures.

"But, even at discounted prices, there is no demand from projects," revealed a source while another said, "The prices of 59-60k are justified but demand is lacking."

2. Global billets markets remain subdued: Negative sentiments continued to prevail in the global billet market in the week under review because of falling global scrap prices, bid-offer disparities, sluggish finished steel demand, and market participants adopting a wait-and-watch approach amid expectations of further price cuts. The Indian billets exports market remained at a standstill. Offers dropped $32/t but buyers still resisted the $560/t FOB levels. This scenario also impacted the finished longs market in India.

3. Slow offtake in Ramzan: This being the Ramzan month, offtake of finished items is slow in the secondary segment too, not allowing the induction furnaces to raise prices either. IF-route rebars remained flat in many markets, rose a bit or even fell sharply by as much as INR 800-900/t w-o-w.

Outlook

Overall, the rest of April is expected to remain quiet. Longs will remain under pressure in the short term and mills are not likely to increase prices.

Flats too may see the sluggishness continuing.

Post-Eid, the market for finished may look up.

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.