India steel index touches 6-month low. But, have prices bottomed out?

• IF-route rebars buck trend amid improved trade
  
  
• Higher inventories weigh down longs
  
  
• Buyers cautious, mills raise flats prices over weekend
  
  

Morning Brief: The India Steel Composite Index touched a six-month low last week although, on a w-o-w basis, it showed some resilience. For the week ended 5 January, 2024, it closed up a minuscule 0.1% to 141.6 points - a level last seen on 4 August, 2023 -- against the previous week's closing of 141.50 points. But, importantly, it covered the 0.7% dip seen in the previous week.

It was the India Long Steel Composite Index which kept the mother index slightly supported by rising almost 1% 136.30 (135.10). The India Flat Steel Composite Index, on the other hand, fell a slight 0.07% to 147 points (148.1).

Factors which influenced the index last week

Longs

IF-route rebar prices see w-o-w upswing: India's induction furnace (IF)-route finished long steel prices witnessed an uptick w-o-w by up to INR 1,300/tonne(t) across markets. Improved trading activities lifted price sentiments, which prompted sellers to hike offers. A similar trend in sponge iron (PDRI) and billets further lent support to IF rebar. For instance, domestic billet prices increased by INR 400-1,000/t and sponge iron prices, by INR 100-900/t across regions.

BF-route rebar prices slide: However, Indian primary mills' list prices of rebars eroded further, for early-January 2023 deliveries, which did not allow the longs index to gain further support last week. Current list prices are hovering at INR 52,000-53,000/t ($625-637/t) on landed basis, against INR 54,500-55,500/t ($655-667/t) levels seen in early-December last year. Trade-level BF-route rebar prices also fell by INR 300/t ($4/t) to INR 52,200/t ($627/t) ex-Mumbai amid slow domestic demand.

Rising inventories impact rebar prices: Domestic rebar prices were under pressure due to rising inventories with both primary and secondary mills. Inventories with primary mills were at around 600,000 t last month against the usual 300,000-350,000 t. Secondary units too witnessed a rise in inventories by 20-25% across regions.

In addition, state-owned steelmaker Rashtriya Ispat Nigam Limited (RINL) restarted its third blast furnace (capacity of 2.5 mntpa) on 30 December 2023 which will further lead to additional supplies in the market.

Flats

Mills' raise flats prices, buyers cautious: Steel mills started CY 2024 with an increase of INR 500-1,000/t in their flats product prices for January sales. Subsequent to the announcement, effective list prices of HRCs (IS2062, Gr- E250, 2.5-8mm) stood at around INR 56,500-58,500/t exy-Mumbai, and CRCs (IS513, Gr-O, 0.9mm) at INR 61,500-63,750/t exy-Mumbai). HR-plates (E250, 20-40mm) rose to INR 59,500-65,000/t exy-Mumbai.

Trade-level HRC and CRC prices remained range-bound last week. Benchmark HRC, ex-Mumbai, stood at INR 54,000-55,000/t and CRCs hovered at INR 61,500-63,000/t as on 2 January 2024 and maintained the levels in the second assessment on 5 January. Trading was subdued last week till 3 January, post-which buyers became cautious as they awaited price announcements from mills for early January sales.

Imports exert pressure on prices: Additionally, the presence of cheaper imports from previous bookings kept buyers away from the trade segment, pressuring prices resultantly.

Subdued exports front: Trade continued to remain subdued on the exports front with offers to the Europe sector remaining flat w-o-w at $690-700/t. Activity on the Middle East sector was marked by a deal in the previous week but offers to Southeast Asia are on hold since September amid cut-throat competition from Chinese sellers.

Outlook

Mills raised list tags over the weekend, indicating that prices may have bottomed out, especially since globally prices have been showing an uptick. Increase in raw material prices pushed up prices. Moreover, imports may see a dip from January onwards, which can keep prices supported.

Plus, Q4 may see hectic activity in terms of project awarding and closures ahead of the fiscal year-end and also because this is an election year.

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.

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.

2nd India Steel and Metal Conference: SteelMint, along with the Steel Users Federation of India, will be organizing the 2nd India Steel and Metal Conference: Supply Chain & Sourcing Strategies, over 10-11 January, 2024 in Mumbai. Several key sessions will explore the current challenges and enablers. Experts will also try to read future trends. Particularly, there will be a session on, "Factors that will drive Indian steel prices in short-to-medium term". This is the only conference focusing on steel end-user industries and their issues. It will be followed by the glittering SUFI Steel Awards, 2023. Register now!