India steel index remains range-bound w-o-w, longs stage smart rally

• IF rebar gains as trade activities improve, list prices rise
  
  
• HRC tags stable amid high inventories, liquidity shortfalls
  
  
• Weak demand keeps HRC export offers under pressure
  
  

Morning Brief: BigMint's India Steel Composite Index notched a modest uptick of 0.3% w-o-w to 128.5 points on 20 November 2024, indicating a largely range-bound, dispirited market. However, there was cause for mild cheer, with the index in the green zone for the first time in over a month, specifically since 8 November, when it stood at 133.9 points.

Longs products had a strong showing, with the index up 1% w-o-w, buoyed by gains of 1.9% and 0.9% in structure steel and rebars, respectively. Meanwhile, flats eroded by 0.5% w-o-w, weighed down by a dip of 0.4-0.6% in hot-rolled coils (HRCs), cold-rolled coils (CRCs), and galvanised plates (GPs).

Factors that impacted the index last week

IF rebar market sees improvements: Induction furnace (IF) rebars, which command a 65-70% share of the market, saw an improvement in trade prices. Tags in Mumbai, in particular, climbed up by INR 700/tonne (t) ($8/t) to INR 47,300/t ($557/t) exw.

The market received a boost from a number of quarters.

First, trade momentum gained w-o-w, with moderate volumes transacted.

Second, encouraged by the pick-up in activity, manufacturers hiked list prices. At the same time, to entice traders, they offered discounts.

Third, support also came from raw material and semi-finished steel prices, which rose following decent procurement. Fourth, inventory pressure alleviated, and idling time stood at around 12 days across markets compared to 12-15 days earlier.

Subdued demand weighs on BF rebar tags: Hit by tepid demand, trade-level blast furnace (BF) rebar prices dropped by INR 600/t ($7/t) w-o-w to INR 52,400/t ($617/t) exy-Mumbai, exclusive of GST at 18%.

The project segment also witnessed poor buying interest, with prices falling w-o-w to around INR 50,000-51,000/t ($589-600/t) FOR Mumbai.

Trades were sluggish amid slack demand. To perk up sales, some mills offered rebates/discounts on their list prices, BigMint heard from sources.

HRC tags stable amid muted demand: Trade-level HRC and CRC prices remained largely stable w-o-w across regions. Benchmark prices in Mumbai were at INR 46,700/t ($550/t) exy for HRCs, a drop of INR 400/t ($5/t) w-o-w, while CRCs stood at INR 53,400/t ($629/t) exy, down INR 200 ($2/t) w-o-w (both exclusive of 18% GST).

Market activity has been subdued for some time, primarily due to weak demand, which in turn has set off a chain of complications. First, sluggish, need-based sales have led to high inventory pressure. Second, with subdued buying interest, there has been no avenue for generating liquidity, both for distributors and mills. Most fresh sales this week were made on credit terms, and payment recovery has emerged as a significant concern.

HRC import arrivals lead to stockpiles: This week, HRC imports, which had earlier been blocked at ports, finally received the greenlight to enter the trade market. This compounded the already existing inventory pressure.

However, optimistically, bulk imports of HRCs and plates declined to their lowest level in this financial year - 192,824 t till 16 December, as per vessel line-up data maintained with BigMint. Another 159,004 t are expected to be imported by the month-end.

Indian HRC export offers under pressure: Competitive offers from China ($520-525/t CFR UAE) and Japan ($522/t CFR Middle East) kept India's HRC export offers to the Middle East under pressure. The same dipped $5-10/t w-o-w to $540/t CFR UAE, following a 25,000-t deal for January 2025 shipment. Conversely, offers to Europe remained stable at $590-595/t CFR Antwerp ($540-545/t FOB, east coast India), but European buyers were wary amid ongoing anti-dumping investigation and extended lead times.

Outlook

Subdued buying, liquidity shortfalls, and high inventories will likely keep domestic market sentiments weak. Chances of a strong rally are low, and steel prices are expected to move within a narrow range in the near term. Even export prospects look gloomy, with the European market entering the winter holidays and Chinese offers continuing to provide stiff competition.

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.