India steel index remains flat w-o-w post-restocking in long steel

• Flat steel continues to feel liquidity pressure
  
  
• Dull export market sees w-o-w drop in offers
  
  
• Short term looks mixed ahead of elections
  
  

Morning Brief: After flickering into positive zone after five weeks, the BigMint India steel composite index fell back into its range-bound groove yet again as it closed the week ended 12 April at 139.7 points. It had closed the previous week at almost similar levels.

It may be mentioned, the index has been moving in a highly narrow range for well over two years now, with most of its weeks seen in negative territory. The last time it had closed up a healthy 8.1% was way back in March 2022. Since then, it has never been able to regain similar levels of w-o-w growth.

Factors that influenced the index last week

While longs have been seeing some pre-election action, flats continued to be under liquidity pressure.

BF rebar prices up on pre-election demand: Mills took an interim hike of INR 500-1,000/tonne ($6-12/t) in list prices of rebars which encouraged a nominal increase of INR 500 ($6/t) for trade-level blast furnace rebars. The latter closed w-o-w at an average INR 53,500/t ($641/t).

Project segment prices too rose on cue by INR 1,000/t ($12/t), to settle at INR 52,000-52,500/t ($622-628/t). But, market sources said the hike was on account of the emergence of good demand ahead of the elections which are scheduled to start from 19 April and continue till 1 June in seven phases.

With the interim hike from mills, the spread between BF-IF prices normalized to INR 3,500-4,000/t ($42-48/t) in April as against INR 2,500-3,000/t ($30-36/t) in March. Spread normalization was another reason for the hike in list prices.

IF-route buyer well-stocked up, prices drop: Induction furnace rebar prices, however, saw a drop by INR 600-700/t ($7-10/t) to INR 49,800/t ($596/t) exw-Mumbai because of two reasons. First, because the festivities. Secondly, and more importantly, buyers were well-stocked up, having bought in considerable amounts in the previous two weeks. IF mills command the major 65-70% of the market.

Demand upswing: India's national highway construction rose 12% y-o-y in FY'24, with the year-end getting a fillip, which translated into robust demand for longs. The total budgetary outlay for infra-related ministries had increased from around INR 3.7 lakh crore ($44.25 billion) in FY'23 to INR 5 lakh crore ($59.80 billion) in FY'24, underscoring the heightened action for longs last fiscal.

Trade-level flat steel prices rise amid dull demand: Flat steel prices, however, continued to feel the brunt of liquidity constraints which are translating into highly measured procurements. Benchmarked hot rolled coil (HRC) prices rose a nominal INR 200/t ($2/t) to INR 51,900/t ($621/t) despite the dull demand. Many feel the price hike was effected to spur some action into the market but they are sceptical if this move will get the desired result.

Export offers fall further in weak market: The exports front continued to look dull with the BigMint HRC index falling further by $7/t w-o-w to $560/t FOB. Offers to the Middle East dropped $5-10/t w-o-w amid Eid. Europe remained cautious. Offers dropped by $5/t w-o-w on this sector. Vietnam was slightly uncertain. Chinese offers here rose w-o-w amid rising futures but slow demand. Thus, there were no firm offers from Indian mills to Vietnam last week.

Outlook

The short term looks like a mixed bag. IF-route longs may continue to remain range-bound as buyers are well-stocked up. The first phase of the elections will start from next week and this may alter market dynamics for BF-route material as well.

In flats, if the rise in Chinese futures sustains then Indian mills may have some leeway to raise prices although domestic demand may continue to remain dull.

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.