India steel index treads positive zone for two consecutive weeks amid planned maintenance

• Raw material cost push keeps BF rebar prices up
  
  
• Mills hold export offers amid output callibration
  
  
• Will further price hikes encourage flats imports?
  
  

Morning Brief: The BigMint India Steel Composite Index is now in positive territory for two straight weeks. The w-o-w increase was not much with the index closing the week ended 26 April up a mere 0.7% to 142.9 points (142). But, the index has been showing some optimism for almost four weeks now, after months of a dismal run.

Both the long and flats indices upped under 1% but, more importantly for mills, both remained in positive zone w-o-w.

Factors that influenced the index last week

Longs

BF, trade-level prices increase: Mills increased list prices further by INR 500-1,500/t ($6-18/t), a move that encouraged trade-level prices to rise on cue. The latter rose by INR 700-1,600/t ($8-18/t) across regions to a five-month high while ex-Mumbai prices were up by INR 1,300/t ($16/t) to INR 56,300/t ($675/t).

Project segment prices also headed north by INR 500/t ($6/t) w-o-w to INR 55,000-56,000/t ($659-671/t).

The price increases were impelled, amongst other factors, by the production cuts undertaken since January, which yielded desired results. Rebar inventory with tier-1 mills fell to 350,000-375,000 tonnes in early April and are possibly still dropping and there are scarcities in certain grades.

IF rebar prices stable amid dull demand: Another reason behind the BF-route price hike lay in the fact that induction furnace rebars remained stable w-o-w at INR 51,300/t ($615/t) amid a dullness in demand that has crept in since the past week as buyers are well-stocked as of now.

The flatness in induction furnace material widened and normalised the gap between BF-IF rebars to INR 4,000-4,500/t ($48-54/t) as compared to INR 3,500-4,000/t ($42-48/t) in the previous month.

Raw material cost push: The raw material cost push played an integral role in hiking tier-1 rebar prices. Prices of BigMint's weekly Odisha iron ore fines Fe62% index increased by INR 350/t ($4/t) to INR 4,950/t ($59/t) ex-mines. Prices rose following the good response to OMC's auction.

Australian premium hard coking coal (PHCC) prices rose by $19/t w-o-w to $260/t CNF Paradip on enhanced buying. A deal of 40,000 t was heard concluded by a major Australian miner which also fuelled the hike.

Flats

Mills announce interim hike amid maintenance shutdowns: Several key tier-1 mills announced an interim price hike in hot rolled and cold rolled coils by INR 500/t ($6/t). Post-hike list prices of benchmark HRCs stand at INR 53,500-54,000/t ($641-647/t) and CRCs at INR 58,800-60,500/t ($705-725/t) respectively, excluding the 18% GST.

Meanwhile, trade-level prices remained range-bound w-o-w at INR 53,000-54,000/t ($635-647) for HRCs, while CRCs hovered at around INR 60,500-61,500/t ($725-737/t).

Mills were encouraged to effect the hike because many of them have taken temporary production cuts through maintenance shutdowns at their hot strip mills (HSMs). One did the same at its cold rolling mill (CRM).

This planned maintenance is expected to counter the lack of both domestic and export demand.

Export offers on hold in quiet market: With the maintenance shutdowns under way in April, most tier-1 mills put their export offers on hold for Southeast Asia and Middle East. Plus, with the increase in domestic prices, mills are more interested in selling in the latter market though demand is thin. Secondly, Chinese HRC offers to Vietnam rose $5/t w-o-w, making Indian offers even more unviable. Thirdly, Europe continues to be quiet, forcing Indian indicatives to be lower by $5/t w-o-w. Fourth, geo-political tensions and bad weather are keeping buyers away in the Middle East.

Outlook

The short term domestic outlook is mixed. The buzz is that mills may opt for further price hikes but whether these would be absorbed by the market remains a question. There is also a fear the consistent price hikes could encourage imports yet again. On the other hand, buyers may need to restock ahead of the rainy season.

In exports, geo-political tensions may continue to keep global markets quiet in the near future amid slack demand and sea-route disruptions. India steel index treads positive zone for two consecutive weeks amid planned maintenance.

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.