India: Trade-level HRC prices at 3-month high; mills may announce interim hike

Trade-level prices of hot rolled coils (HRC) are now hovering at a three-month high, close to the levels last seen in mid-October 2022. The price increase announced by mills in early January got absorbed in the market, hinted a reliable source. Thus, mills are now mulling an interim price hike in the coming days, he added.

It can be recalled that Indian tier-1 mills had raised list prices of flat products by INR 1,500-2,000/t ($18-24/t) in the first week of January. The revised prices stood at INR 55,500-56,500/t ($680-692) exy-Mumbai in the case of HRCs and INR 62,500-63,000/t ($766-772) exy for cold rolled coils (CRCs). Prices exclude GST @18%.

SteelMint's weekly assessment for HRCs stood range-bound at INR 56,500-57,500/t ($692-704), whereas CRCs rose by INR 600/t ($7/t) to INR 61,500-62,500/t ($753-766/t) as on 11 January.

All the prices mentioned above are on exy-Mumbai basis, excluding GST @ 18%. (INR 1 = USD 0.0122492, USD 1 = INR 81.6378)

Factors driving up HRC trade prices:

1. Indian HRC export prices at six-month high on global support: SteelMint's HRC (SAE1006) export index was assessed at $615/t FOB east coast on 10 January, hitting a six-month high, hovering close to the mid-October levels. Mills actively raised their quotes to $650-660/t CFR UAE and $630-640/t Vietnam, which led to an increase of $15/t w-o-w in the export index. This is higher by $97/t from around $518/t FOB assessed on 22 November 2022, as per SteelMint records.

Meanwhile, mills spiked HRC export offers to the European market by about $50/t to $720-725/t CFR this week amid improved restocking activities in the region. These offers were hovering around $660-680/t in the preceding three weeks.

Indian flat steel producers have turned aggressive in seeking more opportunities on the global trade platform. Since the removal of the export duty on 19 November, 2022, mills remained inconsistent in their HRC export offers but quoted higher in successive inquiries, highlighted a source. Opening up of demand in the European and other traditional markets has boosted sentiments along with rising Chinese HRC export offers and futures prices. This, in turn, is impacting supplies in the domestic market.

2. Raw material prices on a rise: Prices of steel-making raw materials like iron ore and coking coal have been on a rise lately. This is among the leading reasons for the mills to raise their list prices apart from the improved global market sentiments.

SteelMint's weekly Odisha iron ore fines Fe 63% index rose by about INR 1,400/t ($17) to INR 5,100/t ($62/t) ex-mines as on 7 January, from INR 3,700/t ($45) on 12 November, as per SteelMint records.

Similarly, Australian-origin premium HCC coking coal prices stood at $315/t CNF India on a weekly average basis for the week ended 7 January. These increased about $52/t from $263/t CNF for the week ended 3 December 2022.

3. End-user industries report improved performance: Better performance of end-consumer industries led to improved demand. Infrastructructure and construction businesses are coming up with requirements lately, while demand from automobile and home appliances and manufacturing sectors has also improved.

Automobile giant Maruti Suzuki rolled out 1,916,875 units in 2022, higher by 250,530 units from the preceding year. In December 2022 it produced 124,722 units as per the company's update on BSE.

Tata Motors recently reported production of 221,416 units in the fourth quarter (October-December), 2022 - 23,683 units higher than that seen in Q4, 2021. Moreover, the output aggregated to 939,281 units in CY2022, up by 256,304 units produced in the previous year.

Improved demand for automobiles and easing of chip shortages has boosted production. This, in turn, has resulted in better demand for HRCs and other value-added products.

Near-term outlook:
Trade-level prices may continue to rise in the coming weeks as traders are refraining from reducing their quotes. Also, with the trade-level price gap closing with list prices announced earlier this month, there is a chance of an interim price hike this month, highlighted a western India-based major distributor. Furthermore, the end-consumer industries will be expediting their activities with the fiscal year inching closer to its end which is going to lend additional support to prices.