India steel index rebounds w-o-w amid price hikes, maintenance schedules

• Pre-poll restocking frenzy keeps BF rebar comfortable
  
  
• Flats see price increase amid maintenance shutdowns
  
  
• Market likely to be cautious amid election roll-out
  
  

Morning Brief: The BigMint India steel composite index staged a smart recovery w-o-w. It closed the week ending 19 April up a neat 1.6% to 142 points.

Both the long and flat indices also showed recovery w-o-w. Longs rose over 2% while flats were up almost 1%.

Factors that influenced the index last week

BF rebar prices up as mills supply previous orders: Indian tier-1 mills increased rebar list prices by INR 1,000-2,000/tonne ($12-24/t) during the week under review. Trade-level prices followed with a w-o-w rise of INR 1,500-2,200/t ($18-26/t). The market witnessed a shortage in supply of certain sizes. Demand in the traders' market remained subdued but prices remained supported as sellers were busy supplying pre-election orders. Current week's benchmarked rebar prices in the trade segment rose by INR 1,500/t w-o-w to INR 55,000/t ($660/t) exy-Mumbai. Prices are exclusive of GST at 18%.

On cue, prices in the projects segment rose w-o-w by INR 2,500-3,000/t ($30-36/t) to INR 54,500-55,500/t ($654-666/t) levels FOR Mumbai.

BF-grade rebars were in a comfortable position last week supported by a few factors. One was the good fiscal-year-end as well as pre-election restocking. Secondly, mills offered greater incentives to distributors to encourage higher year-end offtake. Thirdly, the production cuts in rebar, undertaken since January, have achieved their goal. The supply-demand imbalance has been restored.

IF prices rise, but buyers shy off towards week-end: IF mills too saw decent pre-election demand pull which had helped to support the price hike. W-o-w, IF rebar prices in the Mumbai market increased by INR 1,500/t ($18/t) w-o-w and currently stand at INR 51,300/t ($615/t) exw. However, the price spurt at the beginning of the week led to some hectic buying (on fears of further price escalation), which tapered off towards the weekend.

The demand pull has allowed the number of days for inventory idling to reduce from the 8-10 days in March to 5-7 in April. Some mills undertook maintenance for 2-3 days in April, which also helped to rationalize production and keep demand tbuoyant overall in the current month.

Maintenance spurs price hike in flats: In flats, benchmark HRC prices increased by INR 350/t ($4/t) to INR 52,350/t ($628/t) w-o-w while CRC prices were up by INR 500/t ($6/t) to INR 61,800/t ($741/t) during the same period. This price hike is possibly a function of the maintenance shutdowns being undertaken by many tier-1 mills, because domestic demand continues to be sluggish and cannot be counted as a factor that propelled the nominal price increase.

Export markets remain quiet: BigMint's India HRC export index (for the Middle East and Vietnam) remained flat w-o-w at $560/t FOB east coast as many of the tier-1 mills opted for maintenance shutdowns in April. This resulted in reduced allocations. Indian HRC export offer indications to the Middle East fell further by $5/t w-o-w as sentiments were sluggish amid geo-political developments. Vietnam was not viable as Chinese offers here fell further amid price reductions by a domestic steel major. EU continued to remain sluggish with offers falling further by $5-10/t.

Outlook

The outlook on prices is cautious with the election process having started across India from 19 April. Fresh demand for longs may elude in the near term as buyers are well-stocked at present; but prices may be volatile.

Flat steels are likely to continue with their dull demand trend while exports will remain uncertain because of new developments on the geo-political front as Iran-Israel hostilities rear their head. Moreover, the maintenance shutdowns at tier-1 mills will continue to keep export allocations lower in the short term.

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.