India: Trade-level HRC prices dip w-o-w amid slow demand

• Mills' list price cuts fail to spur buying

  
  
  

• Steady B2C sales offer relief to mills
  
  

India's trade level hot-rolled coil (HRC) prices showed a marginal drop of INR 100-600/tonne ($1-7/t) this week to INR 46,500-49,500/t ($548-584/t) amid slow sales across the assessed markets. Cold-rolled coil (CRC) tags dropped in a similar range to INR 52,500-58,500/t ($618-689/t) across various regions. Softening demand and a persistent liquidity crunch dampened market activity. Although mills reduced list prices m-o-m for December 2024, the move failed to pep up buying interest among end-user industrial segments in the traders' market.

BigMint's benchmark assessment (bi-weekly) for HRCs (IS2062, Gr E250, 2.5-8 mm/CTL) dropped a nominal INR 200/t ($2/t) to INR 47,100/t ($555/t) as on 10 December 2024. Similarly, CRC (IS513, Gr O, 0.9 mm/CTL) prices dropped by the same quantum t0 INR 53,800/t ($634/t). These prices are quoted exy-Mumbai, and exclude 18% GST.

Market updates

1. Flagging demand plagues distributors: Demand in the traders' market remained weak, with buyers opting to fulfil only their urgent requirements and avoiding bulk procurements to cut inventory holding costs. Several distributors across markets voiced concerns about slow sales in the traders' market and the increasing pressure to liquidate their inventories to generate cash. "Sellers in the distribution network are facing challenges, as buyers are booking low volumes on credit, and there have been delays on credit recovery," said a distributor from northern India.

2. Inventory levels shoot up: There were ample stocks in the market, with very few sellers able to maintain lean inventories. A consistent inflow of cheap imported alternatives, improvements in supplies from domestic mills, and limited buying appetite in the traders' market have led to an inventory build-up.

Although apparent steel consumption stood on the higher side, activities in the traders' market contributed very little to it. The lion's share came from business-to-consumer (B2C) sales of manufacturers. Buyers were attracted by volume-based discounts and other benefits on these sales.

"Micro, small and medium enterprises (MSME), which are defining the current landscape, have been struggling to keep up with the change in the market trend. Only those with a stronger liquidity position or easy access to finances have been able to buy in volumes from mills and enjoy the perks that come with them," said an industry participant.

3. Imports remain a concern: Imports have shown a decline over the last 2-3 months, but, amid slow sales, they too have been adding to the inventory pile-up. This month, around 56,830 t of HRC imports were delivered till 9 December, as per bulk vessel line-up data maintained with BigMint.

Additionally, the government's recent proposal of a 25% steel import duty has made Indian buyers cautious. This comes amid the substantial volume of steel imports that has arrived recently from countries with which India has a free trade agreement (FTA), as well as those without. This might restrain imports for the next couple of months or until the levy of import duty is officially announced. However, this is a dual-edged sword, which could restrict exports from India, which is already at a low level.

4. Chinese export offers increase: Over the past four weeks, there has been a continual increase in HRC export offers from world steel giant China. Chinese-origin HRC (SS400) export offers increased by $10/t to $495/t FOB Rizhao on 10 December from $485/t on 19 November.

Outlook

In the wake of issues such as liquidity shortfalls, weak demand, and high inventories, a recovery in trade-level prices in the near term seems to be a challenging task. Export-import (EXIM) activities may be affected by the recently proposed steel import duty from the Indian government, but liquidating inventories will face hurdles until buying improves in the traders' market. Furthermore, a few end-buying sectors, including big business houses and MSMEs, are heard to be dissatisfied with the proposed steel import duty. As a result, prices should stay range-bound in the near term.