Indian steel, raw material prices encounter gloomy Nov. Will 2024 close on brighter note?

• Rebound in demand fails to materialise
  
  
• Iron ore bucks downtrend, tags rise 2-3%
  
  
• Coking coal, HRC prices remain stable
  
  

Morning Brief: India's steel and raw material markets witnessed a largely gloomy November, unable to shake off the post-Diwali lethargy. Mixed trends were observed, with nine of the 17 commodities tracked trending down m-o-m. Exceptions included iron ore, which rose 2-3%, and blast furnace (BF)-route rebars, which witnessed a marginal 1% uptick. Additionally, coal (coking and non-coking) and hot-rolled coils (HRCs) were stable m-o-m.

Although winter typically ushers in a pick-up in steel demand in India, this rebound has been absent so far, amid a confluence of macro-economic factors. Steelmakers focused on offloading their existing inventories, keeping demand for raw materials suppressed. Additionally, with the Chinese market remaining downcast, Trump's potential tariff threats clouding future outlook, and steel imports continuing at elevated levels, Indian steelmakers did not have much to fall back on.

BigMint goes behind the scene:

Factors that impacted domestic steel, raw material prices in Nov'24

Coal

Monthly average prices of both coking and non-coking coal remained firm m-o-m.

Australian premium hard coking coal (HCC): In November, prices were at $220/tonne (t), unchanged from October. Muted demand from India, a softened Chinese market, and weaker trade activities weighed on offers, and buyers were reluctant to raise their bids. Market participants also remained cautious, waiting for clearer direction on prices. Additionally, unsold cargoes came into the market in the middle of the month, leading to surplus supply.

Non-coking coal: Indexed portside ex-Gangavaram prices of RB3 (4800 NAR) from South Africa stood at INR 7,610/t in November compared to INR 7,630/t in October, reflecting a minuscule dip of INR 20/t. Meanwhile, CNF Gangavaram prices of the same grade stood at $80/t in November, the same as in October.

South African thermal coal prices held steady m-o-m, amid limited trades in a cautious market. There were ample stocks at ports and with buyers, which led to downward pressure on trades. Domestic supply was also sufficient, with Coal India's dispatches edging up m-o-m. Additionally, sponge iron prices registered a sharp decline (7% m-o-m), which held back buyers from increasing their inventories.

Ferro alloys

Silico manganese 60:14: The silico manganese index (60:14 grade) from Raipur fell 4% m-o-m to INR 65,870/t in November from INR 68,920/t in the previous month.

Over the month, domestic silico manganese prices faced pressure due to excess inventory held by traders and reduced demand from steel mills. Suppliers resorted to aggressive pricing tactics and panic selling to move material. However, buyers remained guarded in committing to large-scale purchases. Although some smelters reduced production volumes, this failed to offer substantial support. A muted export market compounded the challenges affecting this segment.

Scrap & metallics

This segment saw negative movements across the board, with pig iron recording the highest drop of 10%.

Sponge iron: Prices of sponge iron (pellet-based), ex-Raipur, moved down by 7% to INR 25,550/t in November from INR 27,500/t in October. Sponge CDRI mix dropped by the same percentage to INR 26,920/t from INR 28,940/t in the previous month.

Weak demand in the semi-finished and finished steel markets kept sponge iron prices depressed, with subdued procurement leading to offer reductions and negative margins. The market also failed to find support, with competing raw materials such as pig iron and scrap witnessing declines m-o-m (10% and 2-3%, respectively) and South African thermal coal, a key raw material, remaining stable m-o-m.

Steel-grade pig iron: Offers plunged by 10% in the period under review to INR 35,360/t ex-Durgapur in November from INR 39,330/t in October.

Over the month, weak finished steel demand and easy availability of imported scrap reduced reliance on pig iron. NMDC's pig iron auctions also saw a poor response, with bids dropping by nearly INR 3,000/t m-o-m and bookings continuing to be limited. Additionally, market sentiment softened amid increased domestic merchant supplies and expectations of an influx of imported pig iron, which will likely intensify competition in the near term.

Domestic melting scrap (HMS 80:20): Prices touched INR 32,720/t DAP Mumbai in November, a slim 2% decline from October's INR 33,270/t.

Domestic ferrous scrap prices declined by INR 200-1,000/t across key markets amid subdued market activity. Lower transaction volumes in the semi-finished and finished steel sectors, again, culminated in slack demand amid sufficient scrap supply.

Imported containerised melting scrap: Similarly, European-origin containerised shredded lost 3% m-o-m, to $390/t (INR 33,038/t) CNF Nhava Sheva in November against (INR 33,885/t) in the preceding month.

Imported ferrous scrap prices declined by $8-12/t m-o-m amid sluggish trades and weak steel demand. Additionally, prices corrected to be on par with domestic scrap, which was more affordable and, hence, attractive for buyers.

Iron ore

Iron ore prices were largely range-bound, with price variations of 2-5%.

Fines, lumps: In November, while iron ore fines tags rose by 3% m-o-m to INR 5,390/t (from INR 5,250/t in October), lumps increased by a lower 2% m-o-m to INR 7,240/t (INR 7,080/t in October), both ex-mines Odisha.

BigMint's Odisha iron ore fines index (Fe 62%) climbed up by INR 150/t m-o-m to INR 5,400/t in November. While prices had surged higher earlier in the month, on the back of tight availability of high-grade ore and logistics constraints, the market eventually moderated amid a cautious atmosphere, attributed to declines in pellet and sponge iron prices. The seaborne market was stable m-o-m, amid a boost in demand from Chinese restocking ahead of the winter.

Notably, Odisha Mining Corporation (OMC) sold around 1.15 mnt of fines at its auction on 20 November, with bids (weighted average) falling by INR 350/t m-o-m.

Pellets: Prices eroded by 5% to INR 9,650/t DAP Raipur in November from INR 10,140/t in October.

The monthly average domestic pellet index, PELLEX, fell by INR 500/t m-o-m in November to INR 9,650/t DAP Raipur. There was downward pressure amid excess supply. Declining export offers led to volumes from eastern India getting diverted to the central region. A sharp drop of INR 2,000/t in sponge PDRI prices and rising input costs also pressured Raipur's pellet offers and trades. Other factors that contributed to the downtrend were the persistent decline in steel prices and the m-o-m fall in bids at the OMC auction.

Steel

Billets: Tags fell 4% to INR 39,200/t in November from INR 40,680/t ex-Raipur in October.

The market was in flux throughout the month, amid sluggish trading activity in semi-finished and finished steel. Amid limited inquiries, producers cut prices to encourage sales.

Rebars, wire rods: Tags of the blast furnace (BF)-grade rebar improved by a marginal 1% to INR 54,470/t ex-Mumbai in November from INR 53,750/t in October.

Indian primary mills raised rebar list prices by up to INR 1,000/t for early-November 2024 deliveries as supply tightened. Parallelly, mills' inventories decreased by 15-20% m-o-m, with offtake intensifying because a major steelmaker operated with only one BF in the preceding months. The hike was also supported by higher demand from the project segment.

Meanwhile, the induction furnace (IF) grade edged down by 2% to INR 47,480/t ex-Mumbai from INR 48,250/t in October.

Slow buying activity was observed across major markets due to poor demand and a continued liquidity crunch. Manufacturers also offered discounts to liquidate high inventories. With prices of semi-finished steel and raw materials declining, there was even more incentive for offers to reduce. Additionally, construction activity dampened in northern India, with intense smog leading to the enforcement of the Graded Response Action Plan (GRAP).

Similarly, wire rods (ex-Durgapur) dropped 5% to INR 41,630/t in November from INR 43,740/t in October.

HRCs: Prices of HRCs saw a slight decline to INR 48,060/t in November from INR 48,220/t in October, a change nearly negligible in percentage terms.

Overall, prices were volatile. In early November, thanks to some festive push, flats also saw an uptick of INR 800-1,000/t. However, towards month-end, trade-level HRCs and CRCs were stable w-o-w at INR 48,000/t and INR 54,200/t respectively as the trade market was not willing to absorb the rise, given weak demand, widespread liquidity shortages, and the continued absence of export bookings.

Outlook

With the expected pick-up in demand nowhere in sight, the Indian steel industry could have a depressing end to 2024. China's long-awaited macro-economic stimulus package has failed to restore market confidence. Plus, global markets are on eggshells, with Trump set to be back in the White House and the threat of trade restrictions looming large.

However, support may come from India's proposal to impose a 25% safeguard duty on steel imports from countries with whom it has free trade agreements. The increase in cheap steel imports, by over 50% to 5.38 mnt in April-October 2024 from 3.54 mnt in the year-ago period, has crippled domestic sales volumes. If import volumes could be tamed, a rebound in demand will likely arise. This should ensure that the industry has a comparatively buoyant 2025.