India steel index shows some post-Diwali sparkle, closes in green after 3 weeks

Morning Brief: After wandering in negative territory for three weeks in a row, the BigMint India Composite Steel Index closed up 1.1% at 133.9 points against the 132.4 seen on 25 October, just ahead of Diwali.

Mills breathed a sigh of relief as both the longs and flats indices were in the green after a month of volatility. The former rose a sharper 1.62%, the latter by a more sedate 0.54%.

Prices were up but, despite some active procurements, buyers resisted the higher prices towards the week-end.

Tier 1 mills raise rebar prices amid inventory decline: The sharp increase in longs was triggered by the up to INR 1,000/tonne (t) ($12/t) hike in rebar list prices by Indian primary mills for early-November 2024 deliveries. Post-revision, the tags hovered at INR 54,500-55,500/t ($646-658/t) on landed basis. It may be recalled, mills had opted for several interim price hikes in October.

In the project segment, prices rose another INR 500/t ($6/t) to touch INR 54,000-55,000/t ($640-652/t) FOR Mumbai.

The increase in these list prices can be attributed to a few factors. First, rebar inventories declined 15-20% m-o-m to 200,000-225,000 tonnes (t) in early-November. This was essentially due to tight supplies. Notably, RINL was operating with only one blast furnace (BF) over the last two months, which led to limited supply of material. However, the second blast furnace resumed operations in November, it was heard. Secondly, maintenance shutdowns at plants of a leading PSU steelmaker further aggravated the shortages for certain sizes last month. Supplies are likely to remain tight in the current month. This scenario lent support to prices. Thirdly, buying activities picked up in projects ahead of the festive week, as there was a propensity to restock. This resulted in some inquiries and mills were also fulfilling pending orders.

IF prices stable amid continued sluggish sales: Induction furnace (IF) rebar prices remained largely range-bound w-o-w at INR 47,300/t ($560/t) exw-Mumbai. Manufacturers offered attractive discounts to liquidate material but buyers were cautious, did need-based purchases and opted for a wait-and-watch stance. Bid-offer disparities weighed on markets, with inventories lasting 7-10 days.

Flats prices up amid steeper cost of production: In flats, tier-I steel mills also raised prices by INR 800-1,000/t ($10-12/t) for hot-rolled coils (HRCs) and cold-rolled coils (CRCs) for November sales. Post-hike, list prices of benchmarked HRCs stood at INR 48,500-50,750/t ($574-601/t) exy-Mumbai, while CRCs hovered at INR 54,300-57,250/t ($643-678/t) minus the 18% GST. The price hike was propelled by a few factors. First was the rising cost of production on account of steeper raw material prices, especially iron ore and coking coal, even though the latter is purchased via three-month contracts and there is some buffer involved in current costs. The iron ore fined and lumps indices rose 21% and 24% and coking coal, by 10%, both m-o-m.

Secondly, trade-level HRC-CRC prices were increased ahead of Diwali as buyers opted for some pre-festive restocking. However, this demand dissipated post-festival. Thirdly, imports dropped m-o-m to above 687,000 t against September's almost 780,000 t.

However, since flats had been performing poorly for months now, the current hike translated into a mere 0.54% increase in this sub-index.

Export index remains inert: Another key factor that kept the flats index range-bound was the stalemate in the BigMint HRC export index. It remained stuck at $535/t FOB since it resumed a couple of weeks back. Offers to the Middle East remained stable at $560/t CFR against the Chinese $525-530/t CFR. Offers to Europe too remained inert at $590-595/t CFR Antwerp.

There is speculations about potential anti-dumping duty implementations which may impact flats prices once these are announced. Longs, on the other hand, are positive on the short term, keeping in mind the tight supplies amid resumption in construction activities.

Meanwhile, markets globally are awaiting signals from China, post-announcement of its fresh fiscal measures on 8 November. Chinese price signals will also give direction to markets globally, including India's.