India steel index in red zone again after 3 weeks. Flats steady, longs dip

• IF rebar weighed by bid-offer disparity, inventory glut
  
  
• Flats see pre-festive restocking but imports continue
  
  
• Outlook uncertain, market awaits post-Diwali upturn
  
  

Morning Brief: After hovering in positive territory for three consecutive weeks, Indian steel prices again slipped into the red zone. On 18 October, 2024, the BigMint India Composite Steel Index closed marginally down 0.1% w-o-w at 134.3 points. The index has been straddling near-four-year lows for months now.

The index essentially cushioned a slightly deeper fall because tier-1 mills raised rebar prices w-o-w while trade-level flats held steady.

Factors that impacted the index last week

Tier-1 rebar up for 2 consecutive weeks, trade level follows: India's leading tier-1 mills increased rebar list prices by INR 1,000/tonne (t) ($12/t) each for two consecutive weeks. Post-revision, last week, list prices touched INR 54,000-55,000/t ($642-654/t) on landed basis.

Trade-level blast furnace (BF) rebar prices also increased on cue, by INR 900/t ($11/t) w-o-w to INR 54,500/t ($648/t) exy-Mumbai, exclusive of the 18% GST.

The price hike was triggered by a few factors. 1) Rebar inventories at tier-1 mills declined by up 35-40% over two months (August-October) to 250,000-300,000 tonnes. The successive price hikes since late August ignited some sales as buyers, fearing further increases, did some restocking. 2) Mills understook maintenance shutdowns in July-August, which triggered some tightness in supplies. 3) The receding monsoon led to slightly improved sentiments. However, having said that, buying activity continued to remain slow.

In the project segment, prices also rose by around INR 1,000/t ($12/t) w-o-w to INR 53,000-54,000/t ($630-642/t) FOR Mumbai.

IF rebar goes contrarian, declines in uncertain market: Induction furnace (IF) rebar prices, however, went contrarian, declining in an uncertain market, prompting only need-based procurements. Prices fell by INR 500/t ($6/t) w-o-w to INR 48,100/t ($572/t) exw-Mumbai. Despite this downtrend, manufacturers maintained their list prices, having sufficient prior bookings. But bid-offer disparities weighed on the market, resulting in inventories lasting for 7-10 days.

Flats lose fizz post-Dussehra but hold steady: Flat steel prices, after rising for two consecutive weeks, lost some fizz last week. Hot-rolled (HR) and cold rolled (CR) coil prices remained flat w-o-w at INR 48,500-51,500/t ($577-613/t) and INR 55,900-58,500/t ($665-696/t) respectively amid limited trades and a liquidity crunch.

BigMint's benchmark assessment (bi-weekly) for HRCs (IS2062, Gr E250, 2.5-8mm) remained stable at INR 48,600/t ($578/t) on 15 October 2024. However, CRCs (IS513, Gr O, 0.9mm) increase marginally by INR 100/t ($1/t) to INR 55,900/t ($665/t), ex-Mumbai, excluding 18% GST.

The dullness can be attributed to a couple of reasons. One, buyers had opted for some restocking ahead of Durga Puja- Dussehra and the upcoming Diwali. Thus, markets have turned dull. Secondly, imports continue. Based on vessel line-up data, volumes hovered at 394,008 t till mid-October against 776,835 t in September and 627,426t in August. An additional 165,105 t are expected by end-October which would mean a lower 560,000 t for the entire month. However, the buzz is, some fresh deals were closed recently, causing worries.

Exports throw up mixed trends: Indian mills resumed their export offers to the Middle East in the first week of October, when the Chinese market withdrew for the Golden Week holidays. In the third week, their offers spurted by around $35/t to $565-575/t CFR UAE. But, in a contrarian trend, offers to the EU fell by $5-10/t to $590-600/t CFR Antwerp. Although EU domestic offers remained firm, demand eluded in a dull market.

With Chinese traders back with UAE offers down $15/t CFR w-o-w, the pressure on Indian mills resumed.

Raw materials trend mixed: Raw material prices showed mixed trends. In the BF segment, the BigMint Fe62% Odisha iron ore index rose by INR 200/t ($2/t) to INR 5,000/t ($59/t) in the second week of October, helping flats to hold steady.

IF mills lacked support as sponge iron dipped 2% w-o-w around 14 October and the billet index lost nearly 1% in this period.

Outlook

The outlook is somewhat mixed. The market failed to witness the expected demand turnaround so far in Q3 (October-December) and is pinning hopes on some post-Diwali sales. However, flats producers are challenged by auto inventory pile-ups of around 70 days, and continuing imports. In longs, the supply tightness may allow prices to remain firm, especially since a key PSU longs producer is still battling production cuts and other challenges.

Exports too may see a mixed near-to-medium term. Chinese aggressive pricing, overall dull global demand, geopolitics, anti-dumping probes pose hurdles. But, some say, Indian mills can focus on high-margin value-added products to overcome these challenges.

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.

BigMint 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, BigMint 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.