India steel index hobbles in bear territory for over 5 months; short term looks muted
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- Index shows falling trend since mid-Oct'23
- BF-route rebars find support in output cuts
- Exports, domestic demand remain slow in flats
Morning Brief: The BigMint India steel composite index is hovering below 140 for ten weeks now. On 23 March, it closed at 137.8 points, which is a three-year low since similar levels were last seen around March 2021. On 26 March, 2021, the index had touched 136.8. Last Friday's closing saw the index moving in a narrow range, dipping marginally by 0.2%. It may be noted that the index has been steadily falling for more than five months, since 13 October, 2023.
Factors that impacted the index last week:
- Both long and flat steel indices moved in a narrow range.
BF-route rebar prices stay supported: Longs price stayed supported essentially because of the recent production cuts from the larger mills which encouraged them to raise list prices by around INR 500/t ($6/t) earlier in the month. It may be recalled that rebar inventories had fallen to a three-month low of around 500,000 t in early March in a knee-jerk reaction to the cut in output by 80,000-100,000 t in February. Market sources hinted that rebar production from tier-1 mills may now fall by another 70,000-80,000 t in March-end. Supported by the above factors, trade-level blast furnace prices rose by INR 400/t ($5/t) to INR 52,400/t ($626/t).
Project segment prices too rode these internal headwinds to remain firm w-o-w at INR 50,000-50,500/t ($603-610/t).
IF rebar prices drop w-o-w amid slow buying: But the induction furnace (IF) segment treaded bear territory, as a result of which, the longs index failed to show any uptick at all. IF rebars dropped by INR 300/t ($4/t) to INR 49,200/t ($592/t) exw-Mumbai. The market remained slow ahead of the Holi festival of colours. Bulk bookings were absent and sellers offered trade discounts to get material moving. Demand is also slowing with the approaching elections which are to be spread over 19 April-1 June, 2024. Liquidity crunch, which had eased slightly, is again gripping the market because of the year-end financial book closures. It may be noted that IF-based mills command 65-70% share of the rebar market.
With the rise in BF-route prices, its gap with IF rebars narrowed to INR 2,500-3,000/t ($30-36/t) in March as compared to INR 3,500-4,000/t ($42-48/t) in the previous month.
Flats lose steam: Trade-level hot rolled (HR) and cold rolled (CR) prices dipped by a slight INR 200/t ($2/t) last week. HRC prices dipped to INR 52,600/t ($629/t) and CRCs to INR 61,100/t ($731/t) post-decrease.
The price fall was propelled by a few factors. First, buying was sluggish amid the fiscal year-end liquidity crunch. Secondly, mounting inventories, thanks to excess domestic supplies and imports, exerted pressure. Thirdly, traders and buyers went into a pause, awaiting the price support from mills for February amid squeezed margins.
Export offers decline further: The BigMint India HRC (SAE 1006) export index dropped further by $15/t and to a seven-month low last week to $575/t FOB east coast India thanks to the lower quotes from Chinese mills. Thus, Indian offers to the Middle East fell by $10/t w-o-w. The ME market has slowed down with the onset of Ramadan, the holy month of fasting in the Islamic calendar.
Indian offers to Vietnam dropped by around $10/t w-o-w because of the double whammy of weakened domestic demand in the latter and decreased Chinese offers.
The EU market remained dull, pulling down Indian offers by a steep $20/t.
Outlook:
Market fundamentals are not likely to show any sharp upward swing in the near term with the approaching Indian elections, which traditionally take a toll on businesses across the board. New project awarding has been impacted while the year-end book closures are causing a funds crunch which usually continues into April. Thus, buying will remain muted in the short term.
Because of these factors, prices may continue to move in a narrow range.
