India: Steel, raw material prices downtrend m-o-m in Jun'24. Short term looks range-bound

• Dull finished steel demand weighs on raw materials
  
  
• Metallics fall sharply amid rise in production levels
  
  
• Longs hit by quality issues, rains, higher supplies
  
  
• Cheaper imports keep flats producers under pressure
  
  

Morning Brief: Most steel and raw material prices showed m-o-m decline in June, 2024, reveals data compiled by BigMint. Metallics like sponge and pig iron were hit the most, with both registering the steepest decline in June. BigMint goes behind the scene:

Factors that impacted domestic steel, raw material prices in Jun'24

Coal

• Australian Premium HCC coking coal: Average Australian Premium HCC coking coal prices rose 4% m-o-m to $270/tonne (t) CFR India in June, 2024 from $260/t in June. Prices increased as demand for July loading cargoes gained traction on supply constraint fears. Availability of forward loading cargoes remained subdued, pushing up prices. A supply constraint was expected since forward cargoes became expensive amid scarce June loadings.
  
  
• Indexed port-side ex-Gangavaram prices of RB3 (4800 NAR) from South Africa upped a marginal 1% to INR 8,350/t in June 2024 from INR 8,300/t in May 2024. This same grade of thermal coal, CNF Gangavaram, however, dipped 3% to $97/t in June 2024 from $100/t in May 2024. Non-coking coal prices remained overall subdued due to slack demand from India. Buyers had already restocked ahead of the monsoons and domestic supplies were robust enough to meet end-user demand.
  
  

Ferro alloys

• Silico manganese 60:14: Prices of the daily 60:14 grade silico manganese index in Raipur dropped by 6% to INR 84,880/t in June 2024 from INR 89,900/t in May 2024. In fact, prices touched a two-month low in the third week of June. Prices fell because of a few reasons. One, supply was in excess as limited export demand diverted material into the domestic market. Two, demand was weak due to poor offtake in finished steels. Thus, the excess supply had few takers. Three, subdued demand stemmed from poor offtake in finished and semi-finished steels. Thus, billet prices plunged to their four-month lows, further weakening silico manganese. Buyers resisted buying at the higher end of the spectrum.
  
  

Scraps and metallics

These lost ground the most amid weak finished demand and lower coal prices.

• Pellet based PDRI: Pellet-based P-DRI, ex-Raipur, fell a substantial 9% m-o-m to INR 26,710/t in June, compared to INR 29,250/t in May.
  
  
• CDRI mix: Prices of CDRI with a mix of 70% lumps, 30% fines, FeM 80% (+/-1), ex-Rourkela skidded down 8% m-o-m in June to INR 28,040/t (INR 30,460/t in May 2024).
  
  

Prices fell amid higher availability. Around 100,000 t of additional sponge iron volumes were on offer from new plants in central and eastern India. Dull steel demand and prices, and the slight drop in imported South African coal prices also failed to support sponge iron.

• Steel grade pig iron: Pig iron prices in June 2024 fell 9% m-o-m to INR 38,820 (INR 42,680/t in May 2024). A number of factors dragged down prices. One, Tata Metallicks reduced prices by INR 1,500/t which set the cue for other players. Secondly, two steel mills started pig iron production via the blast furnace route, which added to supplies. Thirdly, around 26,250t of imported cargo arrived from Malaysia into India. Fourth, overall, demand for finished and semi-finished steel was slack which impacted pig iron prices too.
  
  
• Domestic melting scrap (HMS 80:20 ex-Mumbai): These fell by 3% m-o-m to INR 35,080/t in June 2024 as compared to INR 36,250/t in May 2024. Prices fell as those of competing raw material like sponge also fell amid declined steel demand.
  
  
• Imported containerized melting scrap: Prices of imported shredded scrap in containers from Europe fell a marginal 1% in June to $415/t CNF Nhava Sheva ($420/t in May). Offers into India fell by $5-10/t primarily due to bid-offer disparities amid lack of buying interest. Arrival of previously-booked material kept demand dull in a volatile domestic steel market. Additionally, cost-effective alternatives like sponge iron contributed to the reduced demand for imported scrap.
  
  

Plus, redirection of shipping routes, because of the Red Sea crisis, has resulted in escalated freight rates, which further dampened interest in imported scrap.

Iron ore

Iron ore lumps and pellets remained more or less range-bound although pellets fell slightly.

• Fines & lumps: Fe62% fines from Odisha upped a mere 1% in June 2024 to INR 5,150/t (INR 5,100/t in May) while the Fe63% lumps (Odisha) gained 4% m-o-m to INR 7,360/t (INR 7,100/t). After remaining at higher levels earlier in the month, prices fell after bids in OMC's auction fell by around INR 1,000/t. The continuous downtrend in domestic pellet, sponge and finished steel prices weighed on iron ore.
  
  
• Pellets: The bi-weekly pellets index DAP Raipur (grade 63%), however, dipped 2% to INR 10,310/t (INR 10,530/t). Fall in global prices weighed on pellet export offers forcing players to divert cargoes into the domestic market. Fall in iron ore, sponge prices plus competitive offers from eastern India also weighed on pellets in central India.
  
  

Steel

This segment, comprising billets and finished products, saw a decrease across-the-board.

• Billets: The ex-Raipur billet index dropped 4% m-o-m to INR 42,550/t in June 2024 (INR 44, 540/t in May).
  
  
• Rebar & wire rods: The ex-Mumbai BF-grade rebar lost 2% m-o-m at INR 57,380/t (INR 58,340/t in May) in the period under review. The IF grade dropped 5% to INR 50,510/t (INR 52,920/t) while wire rods (ex-Durgapur) showed a 4% decline to INR 46,020/t (INR 47,830/t) last month.
  
  

Longs were impacted by weaker construction activities with the onset of the rainy season. Production resumption from RINL led to higher supplies amid low demand. IF mills suffered major inventory pile-ups which dragged down prices to three-month lows. Plus, quality issues also impacted IF rebar sales to NHAI contractors.

• HRC: Ex-Mumbai trade-level HRC prices were almost flat m-o-m at INR 53,840/t (INR 54,100/t) amid weak demand and buyers' resistance to the price hikes in early June. Cheaper imports majorly impacted prices. In fact, India is set to become a net importer of steel in the first quarter (April-June, 2024). Cumulatively, in Q1FY'25 (considering provisional numbers for June), imports are expected to rise to 1.95 mnt compared to 1.51 mnt of exports.
  
  

Outlook

Prices may remain range-bound in July since the monsoon keeps demand dampened, which has a direct fallout on longs. IF prices may have bottomed out but not see any upswings either. Flats may also see some downward correction amidst arrival of import cargoes remain range-bound although some export demand may surface with the announcement of EU quotas.

Iron ore is likely to remain weak in the short term as finished demand is still subdued.

However, coking coal prices may see uptrend in near short term as Anglo American has temporarily ceased operations at its Grosvenor steelmaking coal mine in Queensland, which may slightly impact seaborne coking coal trade.

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