India steel index rises w-o-w in lead-up to Union Budget. But will bullishness persist?

• IF rebar prices increase as trade activity improves
  
  
• BF rebar, HRC tags range-bound on weak demand
  
  
• HRC exports pick up amid Lunar New Year holidays
  
  

Morning Brief: BigMint's India Steel Composite Index climbed up by 0.8% w-o-w on 31 January 2025, as optimism swelled in the market right before the Union Budget on 1 February.

In tandem, both the longs and flats sub-indices were up, the former by a healthy 1%, while the latter by a slight 0.3%. Structure steel recorded the highest gain w-o-w, possibly as expectations were rife regarding the announcement of robust infrastructure investments in the Budget.

Factors that impacted the index last week

IF rebar prices pick up as trades improve: Induction furnace (IF) rebar trade prices increased w-o-w, as (1) deal activity picked up.

(2) billet and sponge iron prices rose, lending cost support. As per BigMint's assessment, IF rebar prices edged up by INR 200/tonne (t) ($2/t) w-o-w to INR 47,100/t ($543/t) exw-Mumbai.

Manufacturers breathed a sigh of relief as transaction volumes rose following 2-3 weeks of reduced procurement by traders. Inventory idling time also reduced to around 10-12 days across markets compared to 12-14 last week.

BF rebar tags range-bound on muted demand: In contrast, the trade-level blast furnace (BF) rebar market did not see much buoyancy.

(1) Demand was subdued, with participants' unwillingness to engage in trades indicating that market confidence was lagging.

(2) Most players awaited mills' price announcements for February sales, suggesting that there was some uncertainty regarding acceptable tradable values. Notably, a leading PSU steel mill cut its list prices recently, sources informed BigMint.

(3) Raw material prices declined w-o-w. BigMint's Odisha iron ore fines (Fe 62%) index fell INR 100/t ($1/t) w-o-w to INR 4,900/t ($57/t) on 25 January, and prices of Australian premium hard coking coal (PHCC) edged down by $4/t w-o-w to settle at $201/t CNF Paradip.

As a result, BF rebar trade-level rebar prices remained largely confined to the previous week's levels. Tags were stable w-o-w at INR 52,200/t ($602/t) exy ex-GST in Mumbai in particular, as per BigMint's assessment on 31 January 2025.

In the project segment, prices dropped w-o-w to around INR 48,000-49,000/t ($554-565/t) FOR Mumbai. In recent times, prices have been affected by reduced spending on infrastructure and construction projects, particularly in the northern and southern parts of the country which have limited inquiries for products.

Weak demand caps HRC price movements: Price movements in the hot-rolled coil (HRC) segment across India were also largely limited w-o-w. Most locations witnessed a drop, with tags overall settling at INR 46,800-49,000/t ($540-565/t). However, benchmark prices in Mumbai continued to be higher, with BigMint's assessment recording an uptick of INR 700/t ($8/t) w-o-w to INR 48,100/t ($555/t).

Although Mumbai saw a surge, most deals were sealed at the lower end of the price spectrum, at INR 48,000-48,500/t ($554-559/t). Factors boosting sentiments in Mumbai included the following:

(1) Stocks of imported material have dwindled, now accounting for approximately 20% of the market share.

(2) Speculation is rampant about mills potentially hiking prices by INR 1,500-2,000/t ($17-23/t) next month.

(3) There is buzz regarding the imminent implementation of a safeguard duty on steel imports.

However, uncertainty about the sustainability of the price uptrend continues to hamper market activity.

Meanwhile, the market may receive slight support in the near term, with reports indicating that a major plant has shut down for 20-30 days for maintenance. Production loss is estimated at 150,000-170,000 t. However, this information has not been officially confirmed.

Meanwhile, cold-rolled coils (CRCs) stood at INR 53,100-56,000/t ($612-646/t) across markets, with prices exhibiting mixed trends w-o-w.

HRC imports plunge to lowest in FY'25: Imports of bulk HRCs and plates stood at 426,405 t till 27 January, as per vessel line-up data maintained with BigMint. It is expected that an additional 9,133 t will be imported by the month-end and another 135,870 t in the first week of February. Effectively, monthly imports in January may be reaching their lowest point in this fiscal year.

HRC export offers to Middle East, Vietnam resume: BigMint's India HRC (SAE1006) export index for the Middle East and Vietnam resumed this week after a two-month pause. Indian mills began to actively offer in the market, spotting a window of opportunity as pricing pressure eased with Chinese exporters away from the market amid the Lunar New Year celebrations.

HRC export offers to the Middle East increased by $5/t w-o-w to $530/t CFR UAE. These were still moderately high compared to Chinese tags, which were steady w-o-w at $505-515/t CFR UAE.

Demand from Europe remained feeble due to sluggish market sentiments and ongoing anti-dumping investigations. Last heard offers were at around $590-595/t CFR Antwerp ($540-545/t FOB, east coast India).

Outlook

The market had been looking forward to a host of steel industry-specific measures from the Union Budget FY'26, including the imposition of a safeguard duty on cheap steel imports and other policy initiatives to revive domestic demand.

However, while certain boosts were provided, the steel industry's wish list remained largely unfulfilled. Market participants feel that the capex and infrastructure developments announced are insufficient to shore up industry sentiments.

However, with demand expected to remain soft, prices may continue to move within a narrow range, with moderate volatility possible.

Meanwhile, confusion has also set in, in certain pockets though, over the tariff rate on flat-rolled mild steel products, which effectively remains the same. Only the notified duty has been reduced from 22.5% to 15%, but the basic customs duty (BCD) remains unchanged at 7.5%.

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.