India steel index languishing at pandemic-levels. Bear grip may not ease in short term

• Longs buyers remain in wait-and-watch mode
  
  
• Imports continue to keep flats under pressure
  
  
• Raw materials' price side fails to offer support
  
  
• Market awaits mills' list prices for August sales
  
  

Morning Brief: The bear grip on Indian steel prices is even firmer. The BigMint India Steel Composite Index is now grovelling at three-and-a-half year lows. On 2 August, 2024, the index closed at 135.5 points, dropping a further 0.4% w-o-w. Somewhat similar level (134.5) were last seen on 18 December, 2020, when the world was well in the throes of the first wave of Covid.

The longs sub-index remained almost flat w-o-w but at least in positive zone (up 0.13%) while flats were on the backfoot, falling almost 1% last week.

Factors that impacted the index last week

BF rebar market still in wait-and-watch mode: Trade-level blast furnace (BF) rebar prices declined further w-o-w by INR 400-900/t ($5-11/t) amid dull buying. This marked the eighth consecutive week of decline in prices. Prices (12-32mm, Fe500D and Fe550D) in the trade segment witnessed a drop of INR 900/t ($11/t) w-o-w to INR 50,800/t ($606/t) exy-Mumbai minus 18% GST.

In the projects segment, prices have fallen to INR 49,000-50,000/t ($585-597/t) FOR Mumbai compared to INR 51,000-51,500/t ($609-615/t) around two weeks back. Inquiries continued to remain limited in a market characterised by bid-offer disparities. Buyers remained in a wait-and-watch mode.

IF rebar slips further in weak market: Induction furnace (IF) rebar trade prices on average fell a further INR 400/t ($5/t) last week to INR 45,000/t exw-Mumbai ($537/t) from INR 45,400/t ($542/t) in the previous week. Cautious buyers continued to do need-based buying, avoiding buying in bulk, in expectation of further price declines. Sellers were aggressive, offering attractive discounts to liquidate inventories. Mills have been forced to calibrate production as per market needs and amid increasing stockpiles. Inventory levels for IF rebar stood at 12-15 days across markets against the 6-8 days seen around April.

The price gap between BF-IF rebars stood at INR 5,500-6,000/t ($66-72/t) ex-Mumbai compared to INR 6,000-6,500/t ($72-78/t) a fortnight back. Since IF rebars enjoy 65-70% share of the market, BF mills' pricing is heavily influenced by the former.

Imports continue to keeps flats under pressure: Despite mills decreasing list prices of flats for July sales, the trade segment remained unexcited. Trade-level hot rolled (HR) coil prices dropped INR 300/t ($4/t) w-o-w to INR 51,200/t ($611/t) and cold rolled (CR) coils slipped by INR 500/t ($6/t) to INR 58,500/t ($698/t) last week.

The imports influx is continuing to snuff out demand from domestic mills and traders. India's bulk HRC and plate imports amounted to over 673,000 t till end-July. Another 163,500-t-plus of cargoes are slated to arrive in the first fortnight of August, leaving mills worried.

Export offers continue to be on hold: Indian HRC export offers continued to be on hold, leaving mills without any support from overseas. Chinese FOB offers to the Middle East and Vietnam fell by another $10/t and $5/t respectively last week, making these markets untenable for Indian players. The EU market was dismal, with no appetite seen for imported material.

Raw materials prices slide m-o-m: In a chicken-and-egg situation, another key factor that failed to keep prices supported was the m-o-m slide in raw material prices in July. The Australian premium HCC coking coal dipped 4%. Imported South African RB3 portside prices slipped 5%. The Fe62% fines fell 12% and lumps an even higher 15%. Metallics like sponge iron were down 4% and domestic and imported scrap, by 5% and 2% respectively. The slide can mainly be attributed to the fall in finished demand and prices.

Outlook

Prices are likely to remain range-bound or trend lower in the short term since the monsoon is still keeping construction activities restricted across India. Flats demand will not possibly revive soon under the present circumstances. The market is now focused on mills' list announcements for August sales, for future price clarity and direction.

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.