India: Steel, raw material prices range-bound in Jan'24 amid dull demand

• Lacklustre demand takes shine off scrap, metallic prices
  
  
• Tepid sponge demand impacts SA thermal coal
  
  
• Decreased steel demand leads to inventory glut
  
  

Morning Brief:Steel and raw material prices continued to move in a narrow range for the second month in a row in January 2024 amid tepid steel demand. Iron ore fines moved up more sharply than others while portside thermal coal showed the deepest m-o-m drop. Tepid steel demand kept price movements

BigMint goes behind the scene:

Coal

Australian Premium HCC coking coal: Average Australian Premium HCC coking coal moved up 3% m-o-m to $350/tonne (t) CFR India in January 2024 compared to $340/t in December 2023.

The price support can be attributed to concerns over potential disruptions in shipments due to tropical cyclone Kirrily which had a landfall near the Australian coast.This led to scheduling halts at ports, including Hay Point, Abbot Point and Gladstone, which propped up prices somewhat.

That apart, adding to supply pressures, Hay Point underwent a scheduled maintenance from 8-15 January, 2024 and Gladstone from 15-18 January. Port Kemble took a 10-hour maintenance on 31 January.

Indexed port-side ex-Gangavaram prices of RB3 (4800 NAR) from South Africa fell the sharpest amongst steel-related raw materials in January 2024 - by 5% to INR 7,940/t in January 2024, from INR 8,400/t in December. This same grade of thermal coal, CNF Gangavaram, remained flat m-o-m at $90/t last month. Portside prices fell because of the limited interest shown by sponge iron producers - who generally prefer South African thermal coal because of their specifications - amid the dull demand for finished steel prevailing in the Indian market.

CNF Gangavaram prices did not change because the portside sentiments percolated down here too. Plus, there were supply fears because of the recent train collision and derailment at the Richards Bay Coal Terminal.

Ferro alloys

Silico manganese 60:14: Prices of the bi-weekly 60:14 grade silico manganese index in Raipur upped a slight 1% m-o-m to INR 64,580/t in January (INR 63,760/t in December 2023). Portside stockpiles exerted pressure on prices amid slack steel demand. That apart, stable imported manganese ore prices also kept silico manganese stable in India. However, some restocking interest was seen towards the end of January as mills responded to some export enquiries and the global price increase.

Scraps and metallics

These moved in a narrow range in a month marked by lacklustre finished steel demand.

Pellet-based P-DRI: Pellet-based P-DRI, ex-Raipur, dipped a slight 1% m-o-m to INR 26,730/t in January, compared to INR 27,030/t in December 2023.

CDRI mix: Prices of CDRI with a mix of 70% lumps, 30% fines, FeM 80% (+/-1), ex-Rourkela, declined 3% m-o-m in January to INR 27,010/t (INR 27,860/t in December 2023).

This decline in both PDRI and CDRI could be attributed to a decrease in demand. Negative sentiments prevailed in the market influenced by a significant downturn in the semi-finished and finished steel segments.

Liquidity issue was also a concern. Amid lesser cash flow in the market, participants were receiving payments after 10-15 days which led to a decrease in overall trade volumes.

Steel grade pig iron: Pig iron prices showed a 2% rise last month to INR 38,430/t (INR 37,770/t in December 2023). Pig iron prices witnessed a positive trend as major furnaces like Jai Balaji, Kirloskar and Vedanta went under maintenance, putting pressure on supply. In addition, the conclusion of export deals also supported domestic price hikes.

Domestic melting scrap HMS 80:20 (ex-Mumbai): These fell m-o-m 2% to INR 33,150/t against INR 33,790/t in the previous month as the market failed to find support from the finished segments. The drop pertained not only to Mumbai but the entire domestic scrap market. In January, the scrap market overall faced a significant monthly drop of INR 300-500/t, with semi-finished (ingot) prices decreasing by INR 350/t. The finished steel sector experienced slow demand amid liquidity crunch that disrupted regional trade flows. Plus, extreme cold weather in certain regions of India affected scrap collections.

Imported melting scrap: Prices of shredded melting scrap of Europe origin, in containers, CNF Nhava Sheva, remained flat m-o-m in January 2024 at $420/t.

Scrap remained subdued because of the persistent gap between offers and bids, rendering imports unfeasible last month. While offers hovered at $415-420/t, buyers ideally sought material at below $390/t levels since there was no excitement in terms of finished steel demand. Secondly, the landed imported prices worked out to be INR 2,000-3,000/t higher compared to domestic, encouraging buyers to avoid the former.

Iron ore

Iron ore fines prices rose but lumps and pellets saw marginal dips.

Fines & lumps: Fe62% fines from Odisha increased 8% in January 2024 to INR 5,660/t (INR 5,220/t in December 2023) while the Fe63% lumps (Odisha) lost 1% to INR 7,420/t (INR 7,480/t) m-o-m.

Both NMDC and OMC increased prices of fines and lumps last month. NMDC raised prices of DR-CLO by INR 300/t and fines by INR 400/t, effective 24 January 2024. In OMC's auction on 19 January, prices of fines and lumps increased by INR 100-1,000/t and INR 50-550/t respectively m-o-m.

Fines rose amid strong export demand. India's iron ore and pellet exports rose to a 3-year high in CY'23.

However, a subdued domestic steel market kept demand range-bound. The same factors allowed lumps to remain stable.

Pellets: The bi-weekly pellets (63%) index dipped 1% to INR 9,840/t (INR 9,920/t) in January amid lacklustre sponge iron demand. Pellets are a key raw material for sponge producers. However, deliveries of previous export bookings and rise in fines prices allowed pellets to remain range-bound and not register any sharp fall.

Steel

This segment, comprising billets and finished products, mainly saw a marginal dip.

Billets: The ex-Raipur billet index dropped 1% to INR 39,880/t in January, 2024 (INR 40,200/t in December) amid a fall in finished steel demand and sponge iron prices.

Rebar & wire rods: The ex-Mumbai BF-grade fell 4% last month to INR 51,770/t (INR 53,840/t) in the period under review. BF rebar inventories rose 8% in January, compelling the price drop. However, the IF grade remained flat at INR 48,700/t (INR 48,750/t) while wire rods (ex-Durgapur) fell by a similar percentage to INR 43,400/t (INR 43,670/t) last month. IF-grade materials fell by a lesser degree, as billets and sponge were more or less range-bound.

HRC: Ex-Mumbai trade-level HRC prices remained flat m-o-m at INR 54,270/t (INR 55,070/t). Sentiments were low amid additional supplies and imports against a backdrop of slow demand.

Outlook

Although the mills tested the waters with some price increases last month, these were not accepted by the market amid considerable inventories. In longs, production cuts may be in the offing while flats may be challenged by rising raw material prices.

With domestic demand slow, mills may become more active in exports.