India: SteelMint HRC export index falls by $7/t w-o-w as buyers await market clarity

SteelMint's India HRC (SAE1006) export index fell by $7/t to $708/t FOB east coast from $715/t FOB last week. The market remained subdued last week due to absence of trade. Buyers have a mixed outlook on the price trends and are waiting for clarity. Indian mills continued to hold back offers for Vietnam amid limited buying interest and cost effective offers from China.

Rationale: No confirmed deals (T1) were reported in this publishing window. Twelve indicative prices were considered as T2 inputs. The final price was an average of T1 and T2 inputs which stood at $708/t FOB. CFR prices were converted to FOB by deducting freight costs from the buyer/seller.

Why is overseas buying interest subsiding?

1. Chinese export offers still on lower side: Chinese HRC export offer prices have largely remained lower against the expectations of the market. Market participants opined that offers from the country shall rise steeply post the Lunar New Year holidays. Offers for HRC (SS400) stood around $645/t FOB Rizhao just before the holidays, but have risen by a mere $15/t to $660/t FOB as on 14 February 2023.

2. Demand slows down in UAE: The buying interest from the UAE remained subdued and no active enquiries in the market were seen due to which a major Indian mill withdrew HRC offers this week. Last heard offers from India were $740-750/t CFR. Moreover, imported Chinese HRC offers into the UAE dropped by up to $20/t w-o-w to $700/t CFR this week from $710-720/t CFR last week.

3. Vietnamese buyers await Formosa's price announcement: Vietnamese buyers are waiting for the price announcement of Formosa Ha Tinh which is likely to be out this week. On the other hand, imported Chinese HRC offers into Vietnam increased by $5-10/t w-o-w. Offers for Chinese HRC (SAE1006) were heard around $660-665/t CFR Vietnam against last week's $650-660/t CFR. Japanese mills continue to offer around $700/t CFR.

4. Euro depreciation dampens buying interest in EU: The European market also saw a decline in buying interest this week after having reported deals at elevated prices over the past couple of weeks. Last week, a small parcel of HRCs was heard booked for exports at $800/t CFR for delivery in March 2023 following which offers had risen to $810-820/t CFR, informed sources. However, this week, price indications from India have come down to $800/t CFR. The depreciation of the euro against the dollar made buyers hesitant. 1 Euro was trading at 1.06 last week which is now at 1.077 against $.

Near-term outlook

Indian HRC export offers are likely remain range-bound in the upcoming weeks amid mixed overseas market sentiments.

Chinese HRC export offers have also showed volatility amid slow demand in the different markets. On the other hand, China's leading steel manufacturer, Baosteel, has raised HRC, CRC and HDG prices by RMB 200/t ($29/t) m-o-m and heavy plates prices by RMB 300/t ($44/t) for March sales. This is the third monthly price hike in a row by the company amid increasing raw material costs and anticipation of demand recovery.

Another factor is the earthquake in Turkey and the following aftershocks. Market participants opine that the export-import activities from the country is likely to stay impacted amid damage to the Iskenderun port and the recent flooding of the city. Turkiye's finished flat steel exports aggregated to 6.18 mnt in CY22 out of which share of HRC was 1.81 mnt (29%). Turkiye exported 0.59 mnt (33%) HRCs to Europe in CY22. Hence, it will be interesting to see the EU's shift to other countries to make up for the loss in volumes from Turkiye.