India: Trade-level HRC prices drop INR 1,100/t ($13/t) w-o-w on slowing market momentum

Trade reference prices of hot-rolled coils (HRC) dropped by around INR 1,100/t ($13/t) w-o-w in the key market of Mumbai this week. Active restocking in the past few weeks amid rising prices by mills had kept the momentum going for trade-level prices. Now activities have started slowing since the beginning of this week, hinted sources. Global HRC markets too have started turning volatile which has made end-buyers cautious about the domestic trade price levels.

As per our latest assessment on 8 February, trade segment HRC prices dropped to INR 59,500-60,500/t ($719-731/t) exy-Mumbai. However, CRC (IS513 Gr O, 0.9mm) prices stood rangebound at INR 65,000-66,000/t ($786-798/t) exy-Mumbai. Prices exclude GST at 18%. (1 INR = USD 0.0120856 ; 1 USD = INR 82.7431)

Factors impacting market sentiments:

1. Global HRC market sentiments waver: Indian mills have benefitted from an increase in export offers since early January when offers were at around $600/t FOB east coast. Current week's assessment for SteelMint's India HRC (SAE1006) export index is at $715/t FOB east coast, up sharply by $115/t since early January.

However, global market sentiments weakened a bit this week. Chinese HRC export offers to the Middle East and Vietnam declined by $10/t and $30-35/t w-o-w, respectively. The weakening of Chinese HRC futures post the CNY holidays and slower recovery weighs on global market sentiments.

This, in turn, has made domestic buyers cautious leading to a slower sales in the local markets.

2. Restocking demand slows down: Domestic market participants had been active in replenishing their stocks since the mills kept increasing prices frequently in January. There were three rounds of price hike announcements. Furthermore, the mills increased their list prices for early February sales last week. Subsequent to the announcement, list prices of HRC stood at INR 59,500/t exy-Mumbai, while CRC prices ranged between INR 65,500 and INR 67,000/t ($792-810/t) exy-Mumbai, excluding GST at 18%.

"The trade channel participants are now holding decent inventories while demand continue to remain slow. Market activities started cooling down since the beginning of this week," a distributor source informed.

Buyers from the unorganised segments like fabrication and heavy engineering prefer procuring from the trade channel. But elevated prices have forced them to buy as per immediate requirements slowing down material outflow from the trade channel.

Current trade market prices in Mumbai are floating the levels last seen in mid-July 2022. Prices are higher by INR 2,900/t compared to INR 56,500-57,500/t ($683-695/t) exy-Mumbai on 4 January, as per SteelMint data.

India's manufacturing indices also showed a weaker growth momentum in January. The manufacturing Purchasing Managers Index (PMI) grew at a pace of 55.4% in January, down from 57.8% in December.

3. Market participants concerned about cost push: Prices of raw materials like iron ore and coking coal are at multi-month highs.

The Odisha iron ore index (fines Fe 63%) stands at INR 5,750/t, hovering close to mid-May 2022 levels when it was around INR 5,900/t. It has been on a continual rise since the beginning of January.

Weekly average prices of imported coking coal (premium HCC, Australian origin) were at $356/t on 5 February, close to end-June 2022 levels when prices were at $396/t CNF India. Prices have been rising non-stop since early December.

This has kept market participants concerned about the near term momentum of domestic trade prices amid slowing demand.