India: Trade-level coated flat steel prices drop by up to INR 500/t w-o-w

Trade segment prices of coated flat steel products continued to tread in the red zone in the first fortnight of December 2023. The weekly assessed prices for galvanised plain (GP) coils dropped by INR 500/t to INR 67,800/t, ranging between INR 67,500-68,500/t as of 14 December 2023. Similarly, the pre-painted galvanised iron (PPGI) coil prices edged down by INR 300/t and were assessed at around INR 78,300/t, ranging between INR 77,500-79,500/t as of the same date.

The prices mentioned above are on an exy-Mumbai basis, excluding GST at 18%.

Market updates:

1. Cautious buying keeps trade activity in check: The downward pressure on prices has come as a result of the uncertainty buyers are showing towards making bulk procurements. Various micro and macro-economic factors like elections in the country, volatile geo-politics, and other global turmoils have impacted the demand cycle in Q3FY'24. These factors are leading to caution being exercised by end-users in the traders' market, informed a few distributor sources.

2. Market indices report slow growth: India's Manufacturing Purchasing Managers' Index (PMI) for November 2023 relayed that the sector's growth slowed to 56.9 points, a drop of 1.5 points against the previous month (58.4 points). Moreover, this has been the slowest pace of growth this financial year to date.

However, during April-October FY'24, this index maintained an average of around 57 points as compared with the average growth of around 55 points in the previous fiscal.

"The government's focus on strengthening the national infrastructure and green energy solutions have kept the wheel moving for most of the year. However, some manufacturing industries are still struggling, which has been restricting the pace of growth to some extent," said a distributor from western India.

3. Production, consumption volumes decline in Oct: The production of finished coated flat steel products stood at 1.05 mnt in October 2023, a drop of 4.3% over September's 1.09 mnt. Similarly, consumption also dropped by 5.5% m-o-m to 0.79 mnt (0.84 mnt).

This decline in production and consumption- when compared with mills' roll-over of their list prices in November and later announcing a price support/rebate of INR 1,000-1,500/t in December- adds further to the concerns linked to demand-supply dynamics. Improved business-to-consumer (B2C) sales for mills have given the latter some respite when the traders' market participants have procured cautiously in the current fiscal year to date.

In April-October, FY2023-24, Indian mills maintained a monthly average production volume of around 1.06 mnt against the previous year's 0.87 mnt, as per the records maintained with SteelMint. The monthly consumption volume averaged around 0.77 mnt (0.64 mnt) over the same period.

Near-term outlook: Trade-level prices of coated flat steel products are likely to show marginal fluctuation in the near term. The generally good demand period of October-December has ended with prices treading low this fiscal year. Meanwhile, some participants opine preparations for Q4 (January-March, 2024) and the summer season (April-June, 2024) could help raise demand from the automobile and white goods/consumer durables industries.