Indian mills lift domestic HRC and CRC price on bullish market sentiments

Mills have raised HRC prices upto INR 2,000/t ($27) for Dec'20. Domestic steel price continue to rise along with a boost in iron ore prices and the strong recovery in domestic demand.

Indian steel mills have announced a steep hike in list prices of HRC and CRC by INR 2,000/t for Dec deliveries due to steep hike in iron ore prices and robust demand from auto, white and yellow goods. Meanwhile tight supply due to limited inventories continue to push prices in the domestic market.

Effective prices of major mills for Dec deliveries -

• JSW Steel - Effective prices of HRC stand at INR 46,750- 47,150/t and CRC at INR 55,750- 56,150/t (exy-Mum)
  
  
• AM/NS India - Revised offers of HRC stands at around INR 47,000/t and CRC at INR 56,750/t (exy-Mum)
  
  
• SAIL- Effective price of HRC stand at INR 48,000/t and CRC at INR 55,000t (exy-Mumbai)
  
  
• Prices do not include GST @18%
  
  

Towards the beginning of Nov'20 mills raised HRC & CRC prices by around INR 1,250/t followed by a second hike in mid-month by INR 1,000/t.

Factors behind massive price hike made by steel mills are:

1.Lower inventories with steel mills- Major steel mills based in western India are sitting with lean inventories of around 80,000 to 1,00,000 t at the moment. Another major private steel mill is running at an 88% capacity utilization rate and is expected to touch 96% in Q4. During the pandemic, mills had reduced their capacity utilization rate which resulted in reduced supply. Currently, mills are having only 15 days inventory and it's a challenge to keep 30 days inventory in the present scenario amid increased bookings, SteelMint learned from company officials in a recently organized webinar on the Indian flat steel market.

Also, around 80,000t to 1,00,000t HRC is used for downstream products causing tight supply, thus mills are delaying supply on increased bookings, a Mumbai based distributor shared with SteelMint.

2.Robust demand in auto- Tata Motors posted an impressive 108% y-o-y growth, a massive increase in sales at 21,600 units last month compared to 10,400 units sold in Nov '19. Mahindra & Mahindra Ltd. (M&M) registered double-digit growth in SUVs during Nov, aided by robust festive demand for all their products. Post-Covid outbreak people are giving preference to personal mobility over shared mobility resulting in growth in auto sales.

3. Double-digit sales growth in consumer durables- As per market reports, LG's biggest consumer durable company shared that strong demand witnessed for premium products such as higher-capacity refrigerators, fully-automatic top-load, and front-load washing machines along with microwave ovens and dishwashers. Another company named Haier shared that "The growth has been driven by consumers upgrading from entry-level to mid-level or premium-level products". Overall, home appliances as a category are on a rise due to pent-up demand.

4. Domestic iron ore prices rise further- India's state-owned iron ore miner - National Mineral Development Corporation (NMDC) has announced the price of hike in iron ore for Dec'20. Prices have increased further to 14% for its Chhattisgarh based mines. Last month NMDC increased iron ore prices twice. The miner has raised the price for Baila fines and lump by around INR 500/t while that of DR CLO by INR 580/t. The company's fines price has already hit an all-time high while those lumps are getting closer to all-time high levels. Higher input cost will result in an increase in steel prices.

5. Widening gap between the trade price and mills' offer-Major steel mills are offering HRC at INR 47,000/t exy- Mumbai. However, trade prices are currently hovering at INR 48,250-49,500/t exy- Mumbai. Prices do not include GST extra @ 18%. This provides enough headroom for Indian steel mills to announce a second price hike in Dec'20

Prices in trade segment-

• HRC (IS2062 2.5-8mm) stood at INR 48,250-49,500/t (exy-Mumbai), INR 49,000- 50,000/t (exy-Chennai),INR 49,500-50,000/t (exy- Delhi).
  
  
• CRC (0.9 mm GR) is around INR INR 56,000-57,000/t (exy-Mumbai) and INR 56,500-59,000/t (exy-Delhi) and INR 58,000-59,000/t (exy-Chennai).Prices do not include GST extra @18%.
  
  
• Prices do not include GST @18%
  
  

Mills up for 2nd price hike in Dec? -
Major Mills are planning for a second hike in steel prices in Dec as market sources shared that the recent hike made at the beginning of the month has been absorbed. Also since the prices are demand-driven it is expected to remain strong in the near term.