India steel index inching down to 4-year lows? Sep'24 looks subdued

• Longs cushion fall with supply-side issues
  
  
• Imports fears, supply glut hit flats sentiments
  
  
• Further price declines in flats a possibility
  
  

Morning Brief: Are Indian prices knocking on the four-year-low mark? On Friday, 13 September, 2024, the BigMint India Composite Steel Index lost another 1% to fall to 130 points, a level seen three years and nine months ago - to be precise, on 18 December, 2020 when it had touched 134.5. In fact, last Friday's close was even lower, closer to 11 December 2020's 128.9.

The sub-indices fell in tandem w-o-w. The flat steel sub-index fell a steeper 1.30% but longs a nominal 0.61%.

Factors that impacted the index last week

Domestic flats down amid quarter-end pressures: Benchmark domestic hot rolled coil (HRC) prices fell by another INR 100-500/t ($1-6/t) to INR 48,500-51,700/t ($578-616/t). Cold rolled coil (CRC) prices, on the other hand, remained static at INR 57,700-61,500/t ($688-733/t).

Benchmark trade-level HRC prices were unchanged w-o-w at INR 49,000/t ($584/t) and CRCs, at INR 56,200/t ($670/t) amid lacklustre demand. Prices continued to stay subdued because of a few factors. One, it was heard that trade segment demand was extremely low and retailers and stockists were more focused on liquidating inventory rather than acquiring fresh stocks.

Two, second 2nd quarter and half-year closures are pressuring inventory liquidation. A source at a larger mill said: "Domestic mills are being aggressive on material liquidation due to the quarter-end, and half-year end. This has added to the price pressure."

Three, the imports pressure is still prevalent. Another tier-1 mill source said, the scenario is sentiment-driven because of the imports from China and Vietnam, although there are no fresh bookings. "Arrivals are there, but not much. In addition the ground stocks are high," the source added.

Imports in August stood at 627,426 t. However, an additional 385,509 t are apprehended to arrive in September from previous bookings.

Exports listless amid dumping probes: Export offers to the Middle East and Vietnam continued to be on hold while those to Europe dropped by $5-10/t w-o-w. Export sentiments are listless as the market awaits anti-dumping investigation results from the European Commission and other geographies that have started such probes. Globally, demand from automotive and construction is failing to look up, adding to the demand pressure.

BF rebars resilient amid supply fears: Longs were able to cushion the fall to an extent as trade-level blast furnace-route rebar remained range-bound w-o-w and even witnessed a slight increase in some markets. On 13 September, BF rebars closed stable at INR 50,600/t ($603/t) ex-Mumbai, minus the 18% GST.

Project segment prices too closed inert w-o-w at INR 49,000-50,000/t ($584-596/t), ex-Mumbai.

Demand was weak but prices remained resilient. This could be attributed to supply fears as a key public sector longs producer is now operating with only one furnace, with the balance two shut down.

IF rebar prices stable amid production cuts: Induction furnace rebar prices too put up a valiant fight-back spurred by two reasons. One was the stability seen in the prices of tier-1 mills. Secondly, IF mills had calibrated production by around 25% amid rising inventories and 12-15 days' idling time. This also helped to rationalise supply to an extent. Thus, IF rebars also ended the week stable at INR 45,600/t ($544/t) ex-Mumbai.

Raw material prices show mixed trends: Prices of key steelmaking raw materials, especially iron ore and coking coal, exhibited contrasting trends w-o-w impacting especially flats. Iron ore inched up, while coking coal declined.

BigMint's weekly Odisha iron ore fines Fe62% index edged up by INR 100/t ($1/t) w-o-w to INR 4,200/t ($50/t) ex-mines as on 7 September. Australian premium hard coking coal increased by $13/t w-o-w.

Outlook

Further price erosions will not be surprising in the near term in flats - amid imports and a domestic supply glut - and exert greater pressure on margins. Demand may continue to trend low as car makers are sitting on inventory. Mills are also awaiting clarity on dumping duties to be levied on imports from Vietnam.

Longs may be able to tackle prices and rains-dampened demand with supply-side issues.

Exports will continue to remain under pressure amid the dumping probes and Chinese predatory pricing.

Overall, it will be a subdued September.

However, a source informed that a turnaround is imminent but the timing is anybody's guess. "I see it happening from mid-October," the source signed off.