Indian steel prices lose pre-Diwali sparkle. Steel index slides further w-o-w
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- Weak IF rebar drags down longs prices sharply
- Steady export offers keep flat steel supported
- Market awaits possible post-Diwali recovery
Morning Brief: Indian steel prices seem to be down in the dumps yet again. On 25 October, the BigMint India Composite Steel Index closed 1.2% down -- its steepest fall in 13 weeks -- at 132.7 points. This is the second week in a row that the index has closed in the negative after a brief three-week green spell from 27 September-11 October.
The index has been hovering at pandemic levels since August.
Longs, last week, fell a deeper almost 2% as rebars and structural fell a sharp 2% and wire rods by over 1% while flats slightly cushioned the fall at -0.42% amid stable export offers.
Factors that impacted the index last week
Trade-level BF rebar stable on short supply: Trade-level blast furnace rebar prices remained stable w-o-w at INR 54,500/t ($648/t) ex-Mumbai after two consecutive weeks of hikes. The shortages in certain grades due to maintenance downtime at some mills kept prices supported despite the slow buying trend.
In fact, in the projects segment, prices showed an uptick of around INR 500/t ($6/t) to INR 53,500-54,500/t ($636-648/t) FOR Mumbai as buyers started restocking ahead of Diwali so that they could be ready for the demand upturn expected from November.
IF rebar prices slide in weak market: However, it was the poor performance in the induction furnace (IF) segment that dragged down longs. Since IF-route rebars enjoy a major 65-70% of the market, the price movement here has a major impact on the overall price of rebar. IF-mills reduced list prices by up to a steep INR 1,000/t ($12/t) w-o-w while trade-level prices fell by INR 800/t ($10/t) to INR 47,200/t ($561/t) exw-Mumbai.
The IF market was characterised by slow and need-based buying, forcing mills to offer deep discounts to liquidate material.
As a result, the spread between BF-IF route rebars widened to INR 7,000-7,500/t ($83-89/t) last week.
Trade-level HRC shows modest fall ahead of Diwali: BigMint's assessment showed a modest INR 200/t ($2/t) decline in benchmark hot rolled coil (HRC) prices to INR 48,300/t ($575/t), while cold rolled coils remained stable at INR 55,800/t ($663/t), both ex-Mumbai. Overall, HRC prices across markets fell by around INR 500/t ($6/t) to settle in the range of INR 48,300-50,000/t ($574-594/t). The slight decline can be attributed to sluggish sales ahead of Diwali. Also, heavy rainfall in the southern region dampened demand. Moreover, imports, though volumes have lessened, continue to worry mills. October may see over 560,000 tonnes coming to India, lower than September's 777,000 t and August's 627,000 t but still quite substantial.
Export offers steady despite dull overseas market: Indian mills' export offers remained stable w-o-w even though demand was weak. Prices for the Middle East were steady at $570/t CFR UAE even though Chinese tags were lower by $20/t at $530-535/t. ME buyers preferred the latter, recently closing an 18,000-t deal.
Indian offers to Europe were stable at $590-595/t CFR Antwerp. Demand here remained weak amid a domestic supply glut and dull demand from the automotive and construction segments.
Raw materials fail to support IFs: Raw material prices showed a mixed trend last week. BigMint's Odisha iron ore fines index for Fe62% rose by INR 600/t ($7/t) w-o-w to INR 5,600/t ($67/t) ex-mines on 19 October. NMDC raised list prices of calibrated lump ore and fines, with effect from 23 October, by INR 700/t ($8/t) and INR 400/t ($5/t), respectively. This helped to keep flats slightly supported.
However, on a weekly basis, sponge iron prices fell in the range of INR 600-2000/t ($7-24/t) across regions and billets plunged by up to INR 1500/t ($18/t) w-o-w, impacting IF rebar significantly. IF raw material prices dropped because of the continued decline in finished prices, which fell by INR 800-1,600/t ($10-19/t) w-o-w in major regions.
Outlook
All eyes are now on the post-Diwali period. Many feel, there can be a demand and price rebound, possibly from mid-November.
Rebar may remain supported if the supply tightness continues. A leading mill may take maintenance shutdown, which can further exacerbate the scarcity.
In exports, quotas, dumping probes and Eurofer's appeal to the EU governments to save the steel industry could further stifle overseas sales in the medium to long term.
India Steel Composite Index
The India Steel Composite Index is assessed on a weekly basis, every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.
BigMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, BigMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India.
