India steel index hovers at 3-month low; Dec may bring cheer

• Festive dullness spills over, demand remains weak
  
  
• Construction ban in northern India impacts demand
  
  
• Demand, prices may rebound next month
  
  

Morning Brief: The India Steel Composite Index closed at a three-month low of 144.60 points, dipping 0.6% w-o-w for the week ended 24 November, 2023. Similar levels were last seen on 25 August, 2023. The index's overall movement, however, was in keeping with the range-bound trend that has been sustaining for the past many months. In a similar vein, the India Flat Steel Composite Index dipped a mere 0.60% to 149.70 (150.60) and the India Long Steel Composite Index was also down a marginal 0.71% to 139.7 points (140.7).

The flats index is at an 11-week low and, longs are touching levels seen 13 weeks back.

Factors influencing index last week

Festive sales dullness continues: The festive dullness carried on into the subsequent week with markets still weak in terms of spot trades. Resultantly, a leading private mill was heard to have rolled over last week its rebar list prices for early December sales. Trade-level blast furnace (BF) route rebar prices fell across major markets last week by INR 700/t ($8/t) to INR 55,300/t ($663/t), exy-Mumbai, as per SteelMint's assessment. The reasons was tepid demand.

In the projects segment, prices hovered at INR 53,500-54,500/t ($641-653/t) levels FOR Mumbai from INR 55,000-55,500/t ($660-$666/t) a couple of weeks back.

IF segment sales sluggish: In keeping with the overall tenor of the market, induction furnace-route finished long steels witnessed a slight price correction last week. Weak buying interest in finished led to lesser demand for semi-finished steel, prompting manufacturers to decrease offers. Constant fluctuations and lack of price clarity compelled buyers to avoid bulk purchases. IF-grade rebar prices decreased by INR 200-900/t across regions.

Labour exodus: Along with the festive sluggishness, labour exodus also come into play at this time of the year, which further slows down supply. Last week witnessed celebration of Chhatt Puja, which usually sees a scant active labour force in circulation at mills.

Pollution measures limit construction activity: The ban on non-essential construction in the Delhi-NCR region and restricted entry of diesel-run trucks are also taking a toll on project-related activity. These moves comprise part of Stage III of the Graded Response Action Plan and are aimed at fighting the severe winter pollution engulfing northern India.

Sufficient inventory with OEMs, trade segment: The extended holiday season has led to sufficient inventory build-up with OEMs as well as the trade segment. There are demand concerns at present, keeping mills slightly under pressure.

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.

Outlook

How will Indian steel demand pan out in the short to medium term? Next month looks more positive. Market participants expect a demand rebound from December, shaking off the festive sluggishness. An upturn in the exports market is also possible because Europe is showing some signs of demand recovery and Indian mills have already upped offers by $10-15/t. This, along with the rise in global prices, will support domestic prices too.

This trend is expected to sustain in Q4 (January-March, 2024) it being the peak demand season in India. Plus, imports pressure may ease by then. The one red flag, however, is rising coking coal prices.

Upcoming conference update: Keeping above factors in mind, SteelMint, along with the Steel Users Federation of India, will be organizing the two-day, Indian Steel and Metal Conference: Supply Chain & Sourcing Strategies, over 10-11 January, 2024 in Mumbai. This is the only conference focusing on steel end-user industries and their issues. It will be followed by the SUFI Steel Awards, 2023. Register fast to avail of special offers.