Indian mills roll over HRC prices for Sept; but rebates not ruled out

Two primary Indian mills have rolled over HRC prices for early September deliveries in a bid to push up sales in the domestic market, SteelMint understands from market sources.

ArcelorMittal/Nippon Steel India (AM/NS India) has reportedly rolled over HRC and CRC prices for Sept'21 deliveries, SteelMint learnt from company officials. Current prices: HRC stands at around INR 67,000/t ($918/t) CRC is at INR 77,000/t ($1,054/t).

PSU steel major Steel Authority of India (SAIL) has reportedly announced a roll over in list prices of HRC and CRC for Sept'21, sources informed SteelMint. Current prices: HRC stands at INR 66,000-66,500/t ($903-910/t) CRC stands at INR 75500-76000/t ($1,035-1,041/t).

Prices are on exy-Mumbai basis, excluding GST at 18%.

Other primary mills are most likely to roll over prices for HRC as well, SteelMint understands from reliable sources.

Some of the sources SteelMint spoke to indicated that the mills are in the midst of negotiating auto contracts. "If they (mills) offer rebates early in the month, their negotiations with the automakers may turn weak," revealed a source.

However, mills are under pressure to liquidate inventory, trade sources inform. If they do not see demand picking up from distributors and end-user industries by mid-September, then they are most likely to offer rebates. But there is no restocking demand at present since traders themselves are struggling to liquidate inventory.

"We cannot rule out a rebate in mid or latter half of September," a source told SteelMint.

SteelMint's benchmark prices of 2.5-8 mm IS 2062 HRC fell by around INR 800/tonne (t) to current levels of INR 65,000-66,000/t (exy-Mumbai), while CRC (IS 513 Gr O, 0.9mm) prices dipped by INR 1,300/t to stand at INR 75,000-76,000/t (exy-Mumbai).

Factors that may push mills to offer rebates/discounts

• Scarce export bookings: Mills hardly have export bookings for October, SteelMint understands, especially for HRCs. The reasons being European quotas have been exhausted and South East Asia is still in Covid throes. The Vietnam government extended the lockdown till September-end and demand is not likely to pick up soon from here. Moreover, Vietnamese mills themselves are looking at exports, putting pressure on seaborne prices.
  
  

Indian mills have been consistently exporting more than 1 million tonne (mn t) of flat steel since March, of which HRCs comprised around 8 lakh tonnes.

However, sources say that HRC exports will likely drop to 5-6 lakh tonnes in September and Steelmint's assessment is October HRC exports will be even lower because the regular markets are not buying.

• Iron ore prices correct downward: SteelMint's weekly Odisha iron ore fines (Fe 62%) index moved down by around INR 1,200/t to INR 6,900/t (ex-mines, including royalty, DMF and NMET). Prices have declined by INR 2,300/t since the end of July. India's largest government-owned merchant iron ore miner, NMDC, has cut iron ore prices for Sept'21 deliveries by INR 1,000-1,160/t ($14-16/t), SteelMint learnt from credible sources. Furthermore, with a decline in prices of the upstream product, pellets, due to the absence of exports, it is likely that prices of fines will continue to trend down. Globally, iron ore prices have trended down because of lack of Chinese appetite.
  
  
• Lower demand from the auto sector: Auto companies are taking production cuts because of the semi-conductor shortage. Therefore, demand from the auto sector may be less in September-October. Maruti Suzuki India has already announced a 60% production cut in September. Sources said auto makers operate on thin margins and rising input costs will hit profitability.
  
  

Outlook

Increased coking coal and met coke prices may support a price hike by mills. However, coking coal contracts are inked quarterly and so the impact will not be felt so deeply in the current quarter but next.

Demand from Europe is emerging for deliveries next year. European traders have not started buying but are exploring negotiations. Since the European quotas for the entire calendar year have been exhausted, the traders are looking to discuss January deliveries. It takes about a month to ship, and mills would need one to two months to ready the cargo. Therefore, the European traders would return to the market to book from October-November.

However, September could keep mills under pressure. "Had export demand been good, they could have had scope to increase prices," said a source.