Indian HRC producers reduce list prices by up to INR 2,000/t m-o-m for Aug'24

Some Indian flat steel producers have reduced list prices of hot rolled coils (HRCs) and cold rolled coils (CRCs) by around INR 1,000-2,000/t ($12-24/t) on m-o-m with effect from 1 August 2024. One private mill has rolled over prices against end-July. A few mills have also extended rebates of around INR 500-750/t ($6-9/t) for July sales, BigMint learnt from industry sources.

Current effective list prices for HRCs (2.5-8mm, IS2062, Gr E250, Br.) are INR 51,500-52,500/t ($614-625/t) ex-Mumbai, while CRCs (0.9mm, IS513 CR1) hover at INR 57,000-58,500/t ($679-697/t). Announcements from some of the mills are yet to be received. The above prices exclude GST at 18%.

What drove mills to reduce list prices?

1. Increased imports

The preference for cheaper imported HRC has impacted prices. Total steel import volumes (including flats, longs, and semis) increased 16% y-o-y to 0.65 million tonnes (mnt) in July, consistently surpassing the 0.6 mnt mark for most of January-July 2024. Import volumes rose by approximately 4.8% m-o-m in July and around 10.7% m-o-m in June this year.

Monthly average offers for Chinese HRC (SS400) fell to $506/t FOB Rizhao in July, a level last seen in August 2020, down from $575/t FOB Rizhao in December 2023. Prices were assessed at $495/t FOB in the recent assessment on 6 August, unchanged w-o-w.

Additionally, Vietnam, once a major export market for India, has recently become an exporter to India. Due to a Free Trade Agreement (FTA) with Vietnam, imports from that country do not attract Basic Customs Duty (BCD) of 7.5% and the 10% cess on BCD (equivalent to 8.25%). Although China lacks such agreements with India, imports from China continue to flow in at competitive prices.

2. Increased production capacities

India's crude steel production increased by around 3.6% m-o-m and 8.9% y-o-y to 12.50 mnt in July. Conversely, consumption volumes have declined over the past few months, from 12.13 mnt in May to 12.10 mnt in June and down to 11.50 mnt in July this year.

3. Correction in raw material prices

Monthly average prices of key raw materials, iron ore and coking coal, in July 2024 fell to levels similar to those seen in July-August 2023 - dropping to the lowest point in one year. BigMint's Odisha iron index for Fe62% decreased to INR 4,538/t in July close to INR 4,300/t seen in August 2023. Similarly, Australian hard coking coal (premium HCC) prices dropped to $255/t CNF Paradip, India, in July nearing the $244/t CNF level seen in July 2023. This is expected to put additional pressure on prices during the seasonally low-demand period of the monsoon season from July to September.

4. Weak export market

India's export volumes have declined due to competitive pricing from other exporting countries (China, Vietnam, Japan and South Korea). Exports to Southeast Asia (SEA), the Middle East (ME), and the European Union (EU) have decreased amid lacklustrer demand and lower quotations from China. Indian mills' prices are not competitive in the global market and so export offers are on hold. India's steel exports fell to 0.31 mnt in June from 1.4 mnt in February and March 2024.

Weekly price update

BigMint's benchmark assessment (bi-weekly) for HRC (IS2062, Gr E250, 2.5-8mm) prices inched down by INR 100/t ($1/t) at INR 51,100/t ($609/t) on 6 August compared to the previous week. Also, CRC (IS513, Gr O, 0.9mm) prices fell by INR 400/t ($5/t) to INR 58,100/t ($692/t) during the same period. These prices are quoted ex-Mumbai, excluding 18% GST, and are for cut-to-length (CTL) deliveries. (INR 1 = USD 0.0119137 ; USD 1 = INR 83.9369)

Outlook:

Given current market dynamics, HRC prices in India are expected to remain under pressure. The combination of increased imports, higher domestic production, lower raw material costs, and weak export demand have created a challenging environment weighing on price recovery. However, these factors need to be reassessed at the beginning of the next quarter (October 2024) to provide a clearer outlook on steel prices in the second half of the fiscal year.