India steel index slips to 16-week low, prices in firm bear grip

• BF-route rebar prices hit four-week lows
  
  
• Flats feel continued imports pressure
  
  
• Short term may continue to stay range-bound
  
  

Morning Brief: Indian steel prices are in a firm bear grip for weeks now. The BigMint India Steel Composite Index has fallen by 1% for three consecutive weeks. On 19 July, 2024, it dropped 1% to a 16-week low to end at 137.7 points against 139 seen on 12 July. While flats dipped 0.85%, longs fell over 1% w-o-w, dragging down the index further.

Factors that impacted the index last week

Trade-level BF rebars hit four-week lows: Longs are obviously on a stickier wicket amid the monsoon rains which have hugely restricted outdoor construction activities, dragging down longs sales. The expected post-election rebound, unfortunately for mills, coincided with the advent of the monsoons. That apart, in a vicious cycle, raw material prices fell on the back of slack finished steel demand, removing any support to the latter's prices. Also, with the Union Budget round the corner, buyers have moved to the side-lines.

Thus, trade-level rebar prices, last week, fell by INR 800-2,000/tonne ($10-24/t) across regions to their four-week lows. The benchmark rebar price, ex-Mumbai, fell by a steep INR 2,000/t ($24/t) to INR 52,300/t ($624/t), as demand remained weak, as in the previous few weeks.

In the projects segment, prices dropped by a sharp INR 1,500-2,000/t ($18/t) to INR 51,000-51,500/t ($609-615/t) levels.

Buyers have now entered a wait-and-watch mode, expecting prices to fall further.

IF-rebar prices decline further w-o-w: Trade-level prices of induction furnace (IF) rebar fell w-o-w by INR 300/t ($4/t) to INR 46,500/t ($555/t) exw-Mumbai. Here too, buyers avoided bulk bookings and resorted to need-based procurements.

Plus, the recent NHAI show-cause notice to IF mills on quality maintenance, is taking a toll on rebar offtake too.

Inventories are idling for 12-15 days against a much lower 6-8 days around April.

With both BF-IF rebar prices falling steadily, the gap has slightly narrowed to INR 6,000-6,500/t ($72-78/t) in July as against INR 6,500-7,000/t ($78-84/t) in the previous month.

Flats continue to feel import heat: Trade-level hot rolled (HR) and cold rolled (CR) coil prices remained range-bound amid cheap imports influx.

In July, imports are expected to rise slightly to 0.36 million tonnes from 0.33 mnt in June. Imports of bulk HRCs and plates touched have crossed 360,000 t till 15 July 2024, and already comprise around 85% of June's 431,000 t.

A few deals were heard booked in early July for September arrivals, giving mills a persistent cause for worry. A consignment of 75,000 t of HRCs was booked at $562-565/t CFR India. In addition, 100,000 t were booked at $562-566/t in the previous week. These cargoes are expected to exert pressure on trade-level prices in the forthcoming weeks.

Benchmarked HRCs, ex-Mumbai and minus the 18% GST, fell by INR 300/t ($4/t) w-o-w to INR 52,200/t ($623/t) on 16 July. However, CRCs went up marginally by INR 200/t ($2/t) to INR 59,800/t ($714/t).

Dull domestic demand is not helping to lift sentiments either.

Exports a no-show: Indian export offers continued to remain on hold till mid-July amid higher Chinese allocations and falling offers. Plus, lower production is also keeping Indian offers on hold.

The EU market remained dull amid oversupply and a summer lull.

Overall, last week, exports were a no-show.

Raw materials fail to support finished prices: Prices of key raw materials like iron ore fines and coking coal dropped w-o-w. BigMint's weekly Odisha iron ore fines Fe62% index dropped w-o-w by INR 200/t ($2/t) to INR 4,500/t ($54/t) ex-mines on 13 July amid fluctuating pellet and sponge prices and pressure from the seaborne market.

Similarly, prices of the Australian premium hard coking coal (PHCC) declined w-o-w by $16/t to $253/t CNF Paradip due to subdued demand amid the ongoing plenum session in Beijing. In addition, offers for June/July loading were reduced, indicating that sellers' were willing to lower prices amid the sluggish market conditions.

Outlook:

The short term may continue to remain subdued amid the slack domestic and global demand conditions. HRC and plates imports are expected to hover at over 0.40 mnt till September, which will exert pressure on flats.

In longs, demand rebound may elude for some more time.

Some clarity on price directions may emerge post-the Union Budget, on 23 July.