India: Trade-level HRC prices drop further by INR 1,500/t ($18/t) w-o-w

Trade reference prices of hot-rolled coils (HRC) dropped by around INR 1,500/t ($18/t) w-o-w in the key market of Mumbai this week amid mixed market sentiments. This has been the second consecutive week when offers dropped.

However, market participants remained concerned about the elevated raw material costs and anticipate prices to rebound in the near term.

As per our latest assessment on 15 February, trade segment HRC prices dropped to INR 58,000-59,000/t ($701-713/t) exy-Mumbai. However, CRC (IS513 Gr O, 0.9mm) prices dropped by INR 1,300/t ($16/t) w-o-w to INR 63,500-64,500/t ($767-779/t) exy-Mumbai. Prices exclude GST at 18%. (INR 1 = USD 0.0120849 ; USD 1 = INR 82.7481)

Factors impacting domestic prices:

1. Liquidation of old inventories: The drop in trade market prices was because some distribution network sources started liquidating their old inventories in the second week of February. This resulted in a panic situation leading to a further decline this week, hinted a major distributor.

"The decline in trade level prices this week has been because of a few sellers liquidating their inventories that were booked earlier at lower prices. Once this is done with they will have no option but to start quoting higher offers," shared a western region-based major distributor.

2. Drop in HRC, CRC export prices: Current week's assessment for SteelMint's India HRC (SAE1006) export index stood at $708/t (INR 58,590/t) FOB east coast, down by a mere $8/t (1%) w-o-w.

Indian mills have temporarily sidelined themselves this week in order to assess the volatile overseas market demand. Mills have kept themselves away from the low realisation fetching Vietnamese market, while they withdrew offers from the Middle East market after the Chinese HRC (SAE1006) offers dropped. Chinese mills were heard offering at $700/t (INR 57,920/t) CFR UAE this week, which was $710-720/t (INR 58,750-59,580/t) CFR a week ago. Indian mills withdrew after having floated $740-750/t (INR 61,230-62,060/t) CFR UAE a week back.

On similar lines, CRC export offers also dropped this week amid slow buying in the overseas markets. India's CRC export offer was assessed at $815/t FOB India as on 15 February 2023, down by $15/t w-o-w. This was followed by a deal of 4,000 t of CRCs booked for exports to Europe (EU). The deal was sealed at $875-880/t CFR EU for early or mid-April, 2023 delivery, informed a credible source.

Market participants opined Turkiye - having suffered from the recent earthquake and subsequent aftershocks, might come around with import requirements in the near future. Moreover, the country's HRC exports to Europe accounted for 33% of total exports of 1.81 mnt in Calendar Year (CY 2022). Hence, it will be interesting to see the EU's shift to other countries to make up for the loss in volumes from Turkiye.

3. Raw material prices: Prices of iron ore and coking coal too stand elevated which is a major concern for the Indian steel producers.

a) Iron ore: On a quarterly average basis SteelMint's Odisha iron ore index (fines Fe 63%) stood at $5,569/t ($67/t) ex-mines in Q4 FY 2023 (one month more to go). The same was around INR 4,120/t ($50/t) ex-mines in Q3, INR 3,777/t ($46/t) ex-mines in Q2 and INR 5,084/t ($61/t) ex-mines in Q1 of the current fiscal year.

Moreover, on a monthly average basis SteelMint's Odisha iron ore index (fines Fe 63%) stood at $5,750/t ($69/t) ex-mines in February 2023 (last weekly assessment on 11 February), about an 8-month high close to INR 6,190/t ($75/t) ex-mines in April 2022. Above prices are inclusive of royalty (15%), DMF (4.5%) and NMET (2%), however, excludes GST at 18%.

b) Coking coal: Imported Australian-origin hard coking coal (Premium HCC) prices have also continued to rise on the quarterly average basis. In Q4 FY 2023, the price averaged around $352/t (INR 29,130/t) CNF India. In Q3 the same was $296/t (INR 24,490/t) CNF, whereas in Q2 at $271/t (INR 22,430/t) CNF.

Also, on a monthly average basis the same was assessed around $377/t (INR 31,200/t) till 16 February, 2023.

Near-term outlook: The market sentiment has started relaying a mixed trend with a few participants sharing improved buying activity while others hinting a drop in inquiries. A few participants opined that the recent drops in trade level prices are temporary and are likely to rebound in the near term.

Furthermore, market activities shall improve in March as there shall be a pressure of completing the Memorandum of Understandings (MoUs), while end-buyer industries shall be on heels to acheive projected targets as the financial year 2022-23 closes next month.