India steel index hits three-week low, longs feel price pressure

• Domestic demand drop leads to longs' price correction
  
  
• Flats stay supported by raised global prices
  
  
• Turkiye's flat imported billets sentiments to further impact longs
  
  

Morning Brief: The India Steel Composite Index hit a three-week low for the week ended 17 March, 2023. In actual terms, however, it inched down a mild 0.6% to 156.70 points (157.71 points in the previous week).

The India Flat Steel Composite Index remained more or less stable at 158.00 points, quite similar to the previous week's 158.30 points. The India Long Steel Composite Index, however, slid down 1% to 155.50 (157.10) points w-o-w.

What factors pulled the index down?

Longs see drop in demand

1. Project segment prices drop: Demand for long products has seen a decline ever since the project segment had stocked up over January-February. Thus, March forced mills to opt for a price correction. Trade-level prices of rebar manufactured through the blast furnace-basic oxygen furnace (BF-BOF) route recorded a drop of INR 800/t ($10/t) w-o-w in the key Mumbai market. Prices have declined for the sixth consecutive week amid subdued demand in major domestic locations.

Current rebar prices in trade segment, excluding 18% GST, are at INR 60,800/t ($737/t) exy-Mumbai, as per SteelMint assessment on 17 March. These are a sharp drop from the previous INR 63,000/t levels offered a month ago. Meanwhile, ahead of the fiscal year-end, demand from the projects segment has remained subdued and current offers from the primary players are at around INR 60,000-61,000/t ($727-739/t) FOR Mumbai as against INR 64,000/t levels in mid-February.

2. IF-route rebar under pressure: Subdued finished steel demand in the secondary sector has been continuing for quite some time now and the week under review was no different. Depressed demand pressured IF-route rebar as well. Weekly average trade prices of IF-route rebar fell by INR 500-700/t across regions, further influencing the price drop in the primary sector, and narrowing the spread. IF-route rebars enjoy a dominant 65-70% domestic market share.

Flats receive support from global markets

1. Global mills raise prices: Flats were able to remain firm because of the support received from global markets. Global steel majors increased their prices. For instance, Chinese steel major Baosteel increased its HRC prices by RMB 200/t for April sales, while Vietnamese steel major Formosa Ha Tinh raised HRC (SAE1006, skin passed) prices to $732/t CIF Ho Chi Minh City earlier in the week.

Indian mills bullish on exports: Indian steel producers are still bullish on export offers in the near term, another factor that kept flats stable. SteelMint heard of export deals getting concluded at higher prices in successive deals, especially to the European market.

2. Coking coal price impact: Australian coking coal prices dropped by around $25/t w-o-w. Last heard prices of the Australian premium hard coking coal (HCC) CNF Paradip were at $357/t against $384/t a week ago. Similarly, the premium HCC FoB Hay Point Australia, had dulled by $26/t to $341/t compared to $367/t seen a week back. Naturally, this spells good news for mills in the form of lesser production cost.

Outlook
The domestic market will continue to witness bearish sentiments this week. The buzz is that primary mills may further lower their rebar offers to below INR 60,000/t levels.

Another factor that may pull down longs further is the reversal in sentiments in the global billets trade with imported prices into Turkiye plateauing w-o-w. These remained flat at $645/t CNF Iskenderun this week, after rising by $35/t from a couple of weeks before. As a result, the global billets trade lost some steam, a sentiment that will pressure down Indian domestic longs prices.

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.