India: Subdued trade keeps domestic HRC, CRC prices under pressure

Persistent weakness in downstream industrial and end-user demand has kept trade subdued in the domestic market, thus keeping the prices of hot-rolled coils (HRCs) and cold rolled coils (CRCs) under pressure.

SteelMint's benchmark price assessment for 2.5-8 mm IS 2062 HRCs stands unchanged at around INR 65,000-66,000/t (exy-Mumbai) while CRCs (IS 513 Gr O, 0.9mm) prices, at INR 73,000-74,000/t (exy-Mumbai), dropped by INR 2,000/t as compared to the previous week. The prices mentioned exclude GST @18%.

Major factors that are keeping prices under pressure in the domestic market are as follows

1. NMDC lowers base prices for Karnataka auction: India's leading merchant miner, NMDC, recently lowered its base price for the Karnataka auctions by INR 1,000/t for iron ore fines and lumps. Post-revision, the floor price for fines (Fe 65%) stands at INR 4,667/t, while that for iron ore lump (Fe 65%) is at INR 5,844/t (basic, excluding taxes). Major miners in Odisha kept their offers firm this week, whereas market participants were hoping for prices to fall amid declining pellet offers and lower bids from buyers.
SteelMint's weekly Odisha iron ore fines (Fe 62%) index has moved down by INR 350/t to INR 6,400/t (ex-mines, including royalty, DMF and NMET).

2. Sluggish demand in the overseas market: HRC export trade from India has come down due to rising concerns on vessels and container availability, besides the persistent low buying interest from established import markets such as Vietnam, Europe, the UAE and others. Notably, Vietnam's two major domestic mills- Formosa Ha Tinh and Hoa Phat have lowered their list prices of HRC, leading to a shift to domestic procurement.
SteelMint's Indian HRC export index stood at $879/tonne (t) FOB east coast, unchanged for the second consecutive week.

3. Restocking activities slow: Distributors are holding sufficient materials in hand because of sluggishness in end-user demand. "Slow demand since the beginning of the second wave has led to stagnation of inventory. Hence, most distributors are delaying their restocking activities," SteelMint learnt from a reliable source in Mumbai. Another major distributor from the Faridabad region said: "The domestic market is very sluggish; we are awaiting mills to offer rebates as the present price levels are not workable."

4. Weak demand from end-user industry: Auto major Maruti Suzuki India (MSIL) is likely to cut 60% of its production while, on the other hand, Mahindra & Mahindra Ltd (M&M) opted for 'no production' for seven days in Sept'21 due to the global semi-conductor shortage crisis. Production cuts in the automotive industry shall dampen demand for steel in the domestic market as well.

In addition to the above, the pipes and tubes sector is also reeling under the pressure of low sales. Property registrations in Mumbai, the country's biggest real estate market, for the month of Aug '21 declined 32% over Jul'21, according to data from the Inspector General of Registration, Maharashtra. A leading branded structural steel tubes manufacturer has cut ERW pipe (25-125 NB, 2.2-6mm thickness) prices by INR 1,000/t ($14/t) to INR 69,250/t on an exy-Mumbai basis, with effect from 15 Sept'21.

Near-term outlook
Domestic HRC and CRC prices are likely to remain under pressure in the near term on the back of sluggish domestic demand and subdued activities in the overseas market.