India steel price index stable w-o-w but have prices bottomed out?

• Indian mills report lower rebars inventories this week
  
  
• Excess supplies keep flats prices under pressure
  
  
• Exhausted EU quotas to limit export opportunities
  
  

Morning Brief: The India Steel Composite Index remained stable w-o-w, closing at 138.90 points compared to 138.80 seen in the preceding week. However, overall, the index has been hovering at almost three-year lows since similar levels (137.3) were last seen in end-January, 2021. Steel prices have been in free-fall for almost five months now.

Long steel prices nearing bottom

BF rebar inventories decline : Tier-1 mills undertook production cuts to restore some supply-demand balance. The longs index rose a minor 0.50% w-o-w because of lesser inventory pressure on tier-1 mills, although trade-level prices of blast furnace (BF) rebars dropped w-o-w amid slow buying interest.

The current week's trade-level BF rebar prices dropped by INR 200/t ($2/t) w-o-w to INR 51,600/t ($623/t) exy-Mumbai.

In the projects segment, prices hovered at around INR 49,500-50,000/t ($597-603/t) FOR Mumbai, down by INR 500/t ($6/t) against last week's levels.

Currently, buyers are only procuring for projects which are on the verge of completion and have adopted a wait-and-watch stance until new projects are announced post- elections later this year.

IF rebar prices rise as raw materials firm up: India's induction furnace-route finished long steel witnessed an uptick in prices w-o-w amid moderate bookings. A rise in sponge iron and billet prices further allowed prices to firm up. W-o-w, prices rose by INR 200-1,000/t ($6-12/t) across regions.

Scrap imports likely to fall in coming months

India's ferrous scrap consumption is around 30 million tonnes per annum in which the share of imported usually ranges between 800,000-1,000,000 tonnes per month. However, of late, volumes are likely to fall to 300,000-400,000 t per month amid fewer bookings made by Indian mills on price disparity and lower margins.

Thermal coal prices dip, offer mills better margins: Thermal coal prices have been dipping slightly which allowed IF mills to garner better margins. However, with the approaching summer, power usage will intensify and call for higher thermal coal consumption, which may raise prices in the near to medium term.

Flats

Excess supply pressures down prices: There is excess supply in the market in the face of sluggish demand. NMDC's Nagarnar Integrated Steel Plant rolled out its first hot rolled coils on trial basis in June last year and made around 80,000 to 100,000 t commercially available per month from November onwards.

JSPL too recently commissioned its 5.5-mntpa hot strip mill at Angul from where some consignments were already booked. Around 120,000 t are expected per month soon enough.

Flats have seen an injection of 200,000 tonnes over the past month or so while demand has not risen commensurately.

Exports under pressure amid exhausted EU quotas: The quotas to Europe have been exhausted, making buyers wary of importing from India and limiting mills' export allocations to this geography. In January alone, India's steel exports to the EU comprised 67% of its total exports of 1.1 mnt.

Further, exporters have been growing jittery as the Red Sea crisis has not shown signs of abating since it broke out in October last year. Freight rates are expected to escalate by 25-30%. The missile and drone attacks from Yemen's Houthi rebels are necessitating diversion of sea routes, especially for destinations like Europe and the Middle East.

Outlook

Long steel prices are likely to move in a narrow range. Chances of rising from here are slim because of sluggish demand but they may have bottomed out and not fall further from here, supported by production costs.

Mills may be under pressure to raise flats prices since coking coal rose in Q3 (October-December, 2023) to an average $349/t CFR India compared to $276/t in Q2 (July-September, 2023). This cost comes into play with a lag of three months or so for mills.

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.