India steel index recovers after 15-week fall. Longs stage smart rally

• Flats continue to fight imports & oversupply
  
  
• Raw material prices rise, support long steels
  
  
• Have domestic flat steel prices bottomed out?
  
  

Morning Brief: After 15 weeks of a sustained free-fall, Indian steel prices staged a come-back into the green zone, although these are still hovering at near-four-year-lows. On 27 September, the BigMint India Composite Steel Index rose 1.20% to close at 131.20 points.

The rally was driven by a smart over 3% w-o-w recovery in the longs sector which closed at 134.9 points. Flats, on the other hand, continued to remain depressed, losing less than 1%.

Factors that influenced the index last week

Tier-1 mills raise rebar list prices, trade-level encouraged: India's tier-1 mills led the rally, increasing list prices of rebars by INR 500-1,000/tonne (t) ($6-12/t) for end-September 2024 deliveries. Post-revision, the tags hovered in the range of INR 50,500-52,000/t ($597-621/t) on landed basis. On cue, trade-level blast furnace (BF) rebars rose by INR 500/t ($6/t) to INR 50,500/t ($597/t) w-o-w exy-Mumbai, minus 18% GST, as per BigMint's assessment on 27 September 2024. The rally was propelled by a supply shortage in the market especially at the cusp of the rainy season. This is a restocking time for construction players as they brace for the post-monsoon resumption in activities. Supply issues cropped up on account of limited production at a PSU longs player which is operating only one of its three blast furnaces. The scarcity encouraged market participants to quote higher.

Project segment prices recovered by around INR 500/t ($6/t) w-o-w to settle at INR 49,000-50,000/t ($585-597/t) as some end-buyers continued with need-based procurements.

In any case, rebars did not fare too badly throughout September. It may be recalled, tier-1 mills had raised prices in early September, so did the trade segment. Mid-month, these were stable and showed a mixed trend a week later.

IF rebars ride BF price rise: Induction furnace mills also raised list prices by INR 1,200/t ($14/t) to INR 46,400/t ($554/t) ex-Mumbai. The reasons were manifold. First, they were encouraged by the price increase in the BF segment. Secondly, mills in some regions continued with a certain amount of production calibration, which led to some supply tightness and supported the price hike. Thirdly, raw material prices also rallied, helping to keep IF segment propped up.

Taking advantage of the current market scenario, many mills reduced discounts too.

Flats remain challenged by oversupply, imports: The flats segment continued to battle challenges. Trade-level hot-rolled coil (HRC) and cold-rolled coil (CRC) prices remained range-bound at INR 46,000-51,000/t ($549-609/t) and INR 55,500-60,000/t ($663-717/t), respectively. Benchmark HRCs and CRCs were also stable w-o-w at INR 47,100/t ($566/t) and INR 55,900/t ($568/t), respectively exy-Mumbai.

Three factors continue to challenge flats. First, the market remained over-supplied with additional material coming in from Nagarnar and JSPL. NMDC's top brass recently said, NMDC Steel, the holding company of Nagarnar Integrated Steel Plant, is set to achieve break-even at an operating profit level in the first half of this fiscal and that the plant will continue to produce 150,000 t of HRCs per month by Q3FY'25.

Secondly, imports are still climbing. Cumulative import volume, based on vessel line-up data compiled by BigMint, touched over 627,300 t till 23 September 2024. Volumes in August and July were at over 627,400 t and 636,650 t respectively. An additional 83,440 t are expected by end of September.

The market remained range-bound, characterised by need-based procurement.

Exports continue to remain damp squib: A third factor keeping flats under pressure is exports. Offers continue to be on hold since May. Middle East and Vietnam continue to be serviced by China at predatory pricing. Indian offers to Europe remained flat w-o-w. Overall, global sentiments are sluggish, especially with China going on a week-long holiday from 1 October and tensions escalating in the Middle East.

Raw material prices increase: Prices of key steelmaking raw materials rose w-o-w, keeping finished longs supported. Odisha iron ore fines Fe62% index increased by INR 300/t ($4/t) to INR 4,500/t ($54/t) w-o-w ex-mines as on 21 September amid shortage in high-grade iron ore fines due to monsoon-related production disruptions. The Australian premium hard coking coal was up $7/t to $203/t w-o-w CNF Paradip.

IF mills also saw increase in production costs as sponge iron rose around 6% w-o-w to INR 26,800/t ($320/t) and the Raipur billet index was up 5% to INR 39,700/t ($474/t).

Outlook

The market for longs has seen a spurt in need-based procurement, which may sustain into the approaching third quarter (October-December). In flats, prices may have bottomed out and can either remain stable or rise from here, especially since the festive season is round the corner.

However, exports will continue to languish given the current geopolitical scenario and impending anti-dumping investigations.

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