Indian primary mills roll over Sept re-bar prices; short term looks range-bound

Although it seemed that domestic long steel demand was set for a prolonged period of recovery with the monsoons drawing to a close and the approaching festive season, it hardly comes as a surprise that the integrated steel mills in the country have rolled over construction steel, especially re-bar, prices for Sept'21 delivery.

The roll-over in re-bar prices trails the roll-over in HRC prices by the major mills in the country, which was effected to stimulate domestic demand that doesn't seem to have picked up as rapidly as expected, although it would have seemed natural for mills to raise prices, given the low level of inventories in Aug'21.

Secondary mills raise capacity

However, the large secondary steel sector in the country, which mainly churns out long steel products, has boosted capacity utilisation in the wake of rapidly sliding raw materials prices - majorly iron ore and pellets.

Notably, the sprawling secondary steel sector enjoys a major share of 60-65% of the market in the long products segment, with the rest being supplied by the primary mills. Naturally, increased utilisation levels by the secondary manufacturers - that constitute a major chunk of the market - is bound to put pressure on prices.

Iron ore drops, while imported coal soars

However, it is pertinent to mention that elevated prices of imported thermal coal have somewhat offset the gains accruing from dropping iron ore prices for secondary mills in the country.

BF re-bar prices stable

As per SteelMint reports, blast furnace re-bar prices remain stable for Sept'21 deliveries in most major markets, as announced by a few large mills. The major factor that has contributed to stable prices is weak sentiments in the induction furnace re-bar market, with prices declining by INR 2,000/t in Aug. Current blast furnace re-bar (Fe 500/550D, 12-32 mm) offers are at around INR 51,500-52,500/t exy-Mumbai, excluding GST.

Market movements

Many leading induction furnace re-bar producers have announced reduction in offers in the first week of Sept on falling semi-finished steel prices and weak finished steel offtake.

It also needs to be mentioned that high steel and cement prices have adversely affected construction activities in large swathes of the country and steel user associations are pitching for a rationalisation in prices, although domestic prices are at 20% discount to import offers. At a time of slow recovery in demand after the second wave of COVID-19, mills are not in a position to raise prices.

Exports drying up

Notably, Indian mills have lowered re-bar export offers, w-o-w, by $15/t. Offers for BF re-bar (10-40mm, B500B) were heard at around $715/t CFR Hong Kong on actual weight basis last week. However, no export bookings have been reported of late due to bid-offer disparities.

Importantly, Singapore and Hong Kong, which are among the key importers of re-bar from India, already have deliveries of previous bookings lined up. As a result, buying enquiries from these countries have remained subdued. On the other hand, South East Asian countries seem to be silent as buying interest has been affected due to extended lockdown restrictions amidst soaring Covid-19 cases.

Recovering sentiments?

However, sentiments have recovered somewhat on increasing re-bar prices in China to the tune of $80-85/t in the last few days, not to forget China's rising imports of semis. Indian mills have booked around 70,000-80,000 t of billets in the last week or so, as per SteelMint reports.

Therefore, there is enough reason for the market to remain upbeat, especially on higher potential for exports in the near term.