Indian mills 'roll over' HRC-CRC list prices for July sales

Indian private sector tier-1 mills have announced a "rollover" of their list prices of hot rolled coils (HRC) and cold rolled coils (CRC), effective from 1 July 2023 against the last operating levels seen in end-June.

A key reason for the rollover, hinted industry participants, is that the trade-level prices remained stable and did not drop much in June, but were still discounted against the mills' list prices.

Meanwhile, when comparing with the list prices announced for early-June, the July prices are lower by around INR 1,000-1,500/tonne (t).

Factors behind the marginal reduction in list prices:

1. Market prices were largely stable in June: As already mentiond, domestic trade level prices mostly remained range-bound and avoided any steep declines in the month of June. For instance, the prices of hot rolled coils (IS2062, Gr E250, 2.5-8mm) dropped by a meagre INR 700/t to INR 55,100/t towards end-June as against the beginning, as per SteelMint records. Whereas, the same had dropped by a sharper INR 2,800/t in May 2023.

"The price decline in the trade market was not that steep in June despite the lacklustre demand. Trade volumes in the spot market were less because of the need-based procurement pattern of industrial buyers," highlighted a western India-based distributor. Limited restocking in the past couple of months amid declining prices led to this scenario.

Moving forward, prices are likely to stabilize and slowly improve as the inventory levels in the trade market have depleted, he added.

Thus, there will be restocking rush in the near term.

2. Export offers showing improvement: Indian HRC export offers too showed some upward movement towards end-June. For instance, SteelMint's India HRC (SAE1006) export index was assessed at around $570/t this week which has risen back from $565/t FOB in mid-June. Moreover, Chinese HRC (SS400) export offers remained volatile during the month and have now risen back to $560/t FOB Rizhao, matching the levels of early June. The same had dropped to $550/t towards end-June.

A few HRC export deals were concluded in the Middle East market towards mid-June which motivated mills to raise export offers. The last heard deal was concluded at the levels of $610/t CFR UAE for July or early- August shipment.

Some market participants opine that HRC export offers on the global trade platform have largely bottomed out and are less likely to show any significant downward correction in the near term.

Further improvement in demand is expected in the Middle East and European markets, opined a few market participants. Buyers in the UAE are now seeking imported HRCs post-the Eid-al-Adah festival. That apart, end-user industries in the European Union are anticipated to pick up pace post-summer holidays. Most mills in India and Japan have started offering September delivery cargoes, sources informed SteelMint.

3. Manufacturing performance indicators remain at decent levels: The Purchasing Managers' Index (PMI)- that measures the performance of the manufacturing sector- dropped to 57.8 points in June 2023 compared to 58.7 points a month ago. This is slightly above the level of 57.2 points seen in April this year. This indicates a marginal drop in factory output.

4. Cheaper HRC imports not a challenge now: The HRCs booked for imports in June were cheaper as compared with the domestic price levels. In early-June, some import deals were heard concluded for August shipments whose landed cost comes to around INR 49,000-51,000/t exy-Mumbai. However, no fresh import deals were heard since mid-June. Also, export offers from Japan and China have started to show an increase in July. Chinese and Japanese mills are booked for August shipments and are now eyeing higher offers for September deliveries. Moreover, Vietnamese mills are over-booked for exports as they have booked decent quantities to Europe. Thus, possibilities are high that Vietnamese mills will start quoting higher for September shipments, hinted sources.

Near term outlook: Trade-level prices are expected to inch up in the near term with market sentiments showing signs of some upturn. The market buzz that mills may take maintenance shutdowns in July and August should lift current market sentiments further, hinted a few sources. But, cheaper materials slated to come into the market in August could keep spot prices from rising steeply.

Moreover, with global export offers on a rise in July, participants feel the pressure of cheaper imports will likely start easing off. Furthermore, market activities are likely to pick up towards mid-July before the monsoon intensifies in India- which should perk up sales a bit.