India steel index rises 0.9% w-o-w; in green zone for 10 consecutive weeks

• Mills raise price tags for longs and flats
  
  
• IFs perform poorly, price gap with BFs widens
  
  
• Festive season, infra demand may keep price momentum going
  
  

Morning Brief: As of 6 October, the weekly-assessed SteelMint India Steel Composite Index stood at 150.5 points, displaying a modest 0.9% w-o-w increase. This ascent was further emphasised by a 2.4% growth when compared to the index's humble beginnings at 146.9 points during the first week of September. Impressively, the index has been trekking in the green for a remarkable streak of 10 consecutive weeks.

The Flats Steel Composite Index was perched at 154.4 points, up 0.45% w-o-w (compared to 153.7 points), but it has been on a continuous upward trajectory for an impressive 12-week stretch.

Also, the Steel Longs Composite Index, previously dwelling in the red zone in the previous week, made a decisive 1.34% w-o-w move upwards to 146.7 points (144.7 points).

Factors that influenced the index last week

Flats

Mills raise list prices for October sales: India's steel majors raised their list prices by INR 750-2,000/tonne (t) for early-October sales. However, the trade market responded cautiously, with end-buyers adopting a hand-to-mouth procurement approach, wary of the upward price trajectory observed over the past month. This October price hike could be attributed to two factors. One was the rising cost of production, driven by soaring input material expenses. Second was the anticipation of robust demand.

It is worth recalling that mills had executed two price hikes in their list prices during September, with the second surge occurring in the latter half of the month. The momentum extended to the traders' market, where prices of flat steel products surged throughout September. For instance, the bi-weekly assessment of hot-rolled coils (HRCs) (IS2062, Gr- E250, 2.5-8mm) currently stands at INR 59,000/tonne (ranging between INR 58,500-59,500/t) exy-Mumbai. This marks an increase of approximately INR 2,200/t since the INR 56,800/t exy-Mumbai, seen on 1 September. But, last week, the trade segment was quiet, amid subdued sales.

Demand upturn: Mills were also encouraged to hike October prices, buoyed by a demand rebound. As the automotive industry shines brightly post-monsoon, especially during the auspicious festive season of Diwali, the demand for steel surges. Conversely, during the monsoon, construction activities experience a significant slowdown, resulting in reduced steel demand. SIAM data shows that in August, total vehicle production across segments rose 14% m-o-m to almost 24 lakh units. Passenger vehicle sales in August rose 2.6% m-o-m. That apart, infrastructure-related flats demand is also decent, especially in pre-engineered buildings and fabrications.

Raw material prices on upward trajectory: Australian premium hard coking coal prices surged by 8% w-o-w, reaching $358/t FOB and $349/t CNF on 7 October, 2023, driven by heightened trade demand amid tight supply.

The cost dynamics for primary mills revolve mainly around iron ore and coking coal prices. In contrast, induction furnace mills contend with the costs of scrap, pellets, sponge iron, and thermal coal.

In iron ore, India's largest miner, NMDC, increased list prices of iron ore with effect from 1 October 2023. The company raised prices of DR-CLO and fines by INR 250/t ($3/t).

In fact, both coking coal and iron ore are m-o-m up 19% and 15% respectively.

Longs

Primary mills raise list prices of rebars: On the BF-route front, Indian primary mills announced an INR 1,500/t ($18/t) increase in the list prices of rebars for early-October dispatches. Effective rebar list prices now hover in the range of INR 57,500-58,500/t ($691-$703/t) on a FOR basis.

As of 6 October, 2023, the prevailing rebar prices in the trade segment stood at INR 58,100/t ($698/t) exy-Mumbai, minus 18% GST.

Again, the price hike was a function of the sustained increase in iron ore and coking coal prices.

Inventory depletion: Most of the major mills saw sizeable inventory depletion last week amid a period of tight supply. This factor also helped to keep longs prices supported. It may be recalled, there were supply constraints as one primary mill opted for maintenance of its rebar mill while another had issues with its billet caster.

Demand improving: Property registrations in the country's largest real estate market, Mumbai, registered 23% y-o-y growth to 10,600 units in September 2023, while on a monthly basis, registrations remained stable, as per data from Knight Frank India. This indicated that longs demand was possibly reviving, another factor that helped to keep prices firm.

Outlook:

The induction furnace route prices, on the other hand, experienced a marginal decline of INR 300/t ($4/t) to INR 51,800/t ($622/t) exy-Mumbai w-o-w in a volatile market with buyers waiting and watching.

The monthly average gap between BF-IF rebars widened to INR 4,500-5,000/t ($54-60/t) in September as against INR 2,000-2,500/t ($24-30/t) in August. Thus, there is room for IFs to increase prices in the near future.

There is a huge potential for steel demand in the medium term as the Network Planning Group of the PM Gati Shakti Master Plan approved 100 projects worth INR 5.89 trillion recently and the Prime Minister recently laid the foundation stone for the re-development of 508 railway stations as part of the Amrit Bharat Station Scheme, at an estimated INR 24,470 crore. Not to speak of the bullish outlook on flats during the upcoming festive season. These factors may support prices in the short term.

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.