India: Trade-level HRC prices drop INR 900/t w-o-w on muted buying interest

Trade reference prices of hot-rolled coil (HRC) have dropped further by INR 900/t w-o-w in the key market of Mumbai, as per the SteelMint assessment. Weakening overseas HRC and CRC prices have turned buyers cautious leading to subdued buying interest in the traders' market.

SteelMint's benchmark bi-weekly assessment for HRC (IS2062, Gr E250, 2.5-8mm) stood at INR 56,500-57,500/t ($682-694/t) exy-Mumbai on 23 May. Prices have dropped by INR 900/t ($11/t) w-o-w and by INR 200/t ($2/t) against the previous assessment on 19 May.

CRC (IS513 Gr O, 0.9mm) prices also dropped by INR 900/t ($11/t) w-o-w to INR 61,500-62,500/t ($742-754/t) exy-Mumbai against price levels seen in the preceding week. Prices mentioned exclude GST at 18%. (INR 1 = USD 0.0120642 ; USD 1 = INR 82.8899)

Factors impacting trade prices:

The decline in global HRC prices in May has made imports a viable option for Indian buyers. Furthermore, the softening of raw material prices is exerting further pressure on prices as buyers are cautious, and anticipating a further fall in steel prices, informed sources.

1. Export offers drop amid increasing competition: Indian mills reduced their HRC (SAE1006) export offers to the UAE to $610-625/t CFR from the previous week's $630/t CFR. Chinese mills were heard offering at $600-605/t CFR UAE as against $610-620/t CFR a week back. Thus, SteelMint's weekly India HRC (SAE1006) export index dropped to $586/t FOB east coast as on 23 May.

Buyers in the European Union, too, have reportedly moved to the sidelines in anticipation of further decline in offers. Increasing volatility in Chinese SHFE October HRC futures has kept market sentiment bearish. Indian HRC (S275) export offers dropped $10/t w-o-w to $680-690/t CFR Antwerp, Europe, while offers for South Korea HRCs were heard at around $650-660/t CFR.

2. Softening HRC export prices make imports cheaper: The weakening of Chinese HRC export offers has been dragging import prices lower.

Moreover, Vietnam a country having Free Trade Agreement (FTA) with India was heard offering HRCs around $620/t CFR India for July shipment. Prior to this, a deal was concluded around $660-665/t CFR India from Vietnam for June delivery.

Chinese HRC export offers to India were last heard around $620/t CFR India a couple of weeks back equivalent to INR 57,100/t (approx. $689/t) landed Mumbai basis. However, no new quotes have been heard since then.

3. Softening raw material prices: Raw material prices, especially iron ore and coking coal, have moved down on a monthly average basis. For instance, the monthly average price of imported premium hard coking coal (HCC, Australia origin) which was reigning at $290/t CNF India in April has moved down to $249/t CNF India in the recent assessment on 24 May.

Meanwhile, SteelMint's weekly Odisha iron ore (0-10mm, Fe 62%) index which hovered around INR 5,700/t ($69/t) ex-mines in end-February has dropped to INR 5,400/t ($65/t) ex-mines on 20 May. The monthly average stands at INR 5,530/t ($67/t) ex-mines in May.

Near-term outlook: Cheaper imports and lacklustre buying interest is likely to keep trade-level HRC and CRC prices under pressure. Furthermore, market participants are now awaiting list price announcements of major mills for June sales.