Indian HRC imports seen surging in Q2'FY25; prices may remain under pressure

• Lower global price trends make imports attractive
  
  
• Increased production from Vietnam boosts exports
  
  
• Landed imported prices cheaper against domestic
  
  

Morning Brief: India's Hot Rolled Coil (HRC) and plate imports are expected to surge by around 85% to 1.35 million tonnes (mnt) in the second quarter (July-September, 2024) of FY'25 compared to 0.73 mnt seen in the same period in Q2FY'24, as per data maintained with BigMint.

On a q-o-q basis, Q2FY'25 volumes are expected to rise around 69% from 0.80 mnt in Q1FY'25.

It has also been noticed that around 80% of India's steel imports comprise of hot rolled coils (HRCs).

Factors pushing up imports

Lower global prices: Global prices underwent a correction from May onwards amid continued subdued demand, making imports more attractive. Domestic mills across the globe reduced prices to combat the lower demand. Mills in Europe were keen to raise domestic prices but buyers were averse to accepting any hikes.

Chinese HRC export offers fell steadily from $542/t FOB in May to $512/t till-mid July. Japanese prices dropped from $568/t to $540/t FOB in this period as Yen continued to depreciate, while Russian quotes were lowered from $562/t FOB to $545/t.

In Vietnam, Hoa Phat's prices for HRCs dropped to around $555/t CIF HCMC in mid-July against $580/t in May while Formosa's fell to $575/t from $605/t in this period.

The world's largest steel-maker, Baosteel, recently dropped its HRC offers for August sales by $14/t m-o-m.

Increased production by Vietnamese mills: Capacity addition by Southeast Asian (SEA) economies is forcing many of them, especially Vietnam, to look at exports aggressively. Since India has a free trade agreement with Vietnam, it has become a happy hunting ground for the latter's steel mills and exporters.

Moreover, the Indian government renewed the long-stuck Bureau of Indian Standards (BIS) licence of Vietnamese steel major Formosa Ha Tinh in the first half of May, 2024. It may be recalled, these BIS certifications/licences had been held back by the Indian government since April-May, last fiscal, in a bid to lower cheap imports inroads. And, the two countries facing the largest number of such pending renewals were China and Vietnam.

With Formosa's recent licence renewal, import bookings from Vietnam into India have risen alarmingly m-o-m. Volumes in June 2024 almost doubled to 195,000 tonnes (t) from 100,000 t in May and July has seen these figures crossing 200,000 t m-o-m.

Domestic price gap with landed imports widens: The price gap between domestic and landed imports has increased in the latter's favour. Landed prices of HRC imports from Vietnam in July were at INR 48,500-49,000/t ($575-585/t) and Chinese, at INR 50,500/t ($605/t). On the other hand, domestic India HRC prices in mid-July averaged INR 52,500-53,000/t ($625-630/t).

In fact, the price gap between domestic and landed imports has increased especially since April 2024 in favour of imports. Trade-level, ex-Mumbai HRC prices, despite showing a m-o-m decline after rising slightly in May, are still more expensive compared to imported landed prices from China. The gap has widened from $20/t in April to $43/t in June and is at $38/t till mid-July because Chinese offers have been more or less steadily falling.

Outlook

The domestic market is already under pressure due to subdued domestic and export demand. If imports show an exponential growth m-o-m, then Indian mills will be further challenged to keep their prices under check.