India steel index range-bound amid rising inventories

• Imports, flat export offers keep flats under pressure
  
  
• Longs buyers wait and watch amid falling BF rebar prices
  
  
• Prices may remain range-bound in short term
  
  

Morning Brief: The India Steel Composite Index has remained range-bound for three weeks in a row. For the week ended 15 December, 2023, it closed down a marginal 0.3% to 143.4 points against the previous week's closing of 143.90 points.

The India Flat Steel Composite Index fell a slight 0.40% to 148.8 points (149.4), whereas the India Long Steel Composite Index remained almost stable at 138.20 (138.60).

Factors which influenced the index last week

Flats

Oversupply pressure: Prices in the flat steel market fell slightly w-o-w mainly because it was characterised by oversupply. With NMDC's Nagarnar plant having started commercial production of HRCs, additional material is being injected into the market.

As a result, trade-level prices of hot rolled (HR) and cold rolled (CR) coils remained unchanged w-o-w. HRCs stayed inert at INR 55,100/t ($656/t) while CRCs were static at around INR 62,500/t ($744/t).

Imports still a worry: As compared to the highest import volume of 1.08 mnt registered in November, the provisional data for December shows a slide to 0.24 mnt. However, the imports that landed in November and December, but booked earlier, are still exerting pressure on domestic prices. As per sources,for every single unit of demand supply is at treble.

Export offers range-bound: With domestic steel prices in Europe having remained stable amid limited trade, Indian mills were discouraged from raising export prices. Offers to Europe were range-bound at $700-705/t CFR Antwerp. Offers to the Middle East and Vietnam continued to be on hold.

Longs

Steadily falling prices make buyers wary: The widening gap between blast furnace (BF) and induction furnace (IF) rebars made buyers wary, forcing only need-based purchases on expectations of further price falls. The spread widened to INR 6,000/t ($72/t).

Rising inventories: Trade-level BF-route rebar prices dropped by a further INR 800/t ($10/t) w-o-w to INR 53,800/t minus 18% GST amid rising inventories. It seems inventories have risen considerably over the last two months for two reasons: a) demand for construction steel has been subdued amid the construction ban in northern India; and b) with prices falling steadily, buyers are only resorting to need-based purchases. Project segment prices are hovering at INR 52,000-53,000/t ($626-639/t).

IF-route rebar prices rise marginally: In the IF segment, however, prices rose marginally amid moderate demand, which kept the longs index stable. Ex-Mumbai prices stood at INR 49,400/t ($595/t)

Outlook

Imports are expected to taper off from mid-January, 2023 as no new bookings have been heard of in the last fortnight.

Prices may remain range-bound till then. Demand may also pick up in Europe post-Christmas and New Year holidays. This scenario may give Indian mills scope to raise export offers to this geography.

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.

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