Indian tier-1 mills see fall in rebar inventories amid production cuts

Rebar inventories, which had climbed up by around 8% m-o-m in January, have shown some signs of easing in the current month. As per the latest information available to BigMint, inventories with tier-1 mills have dropped by around 10% in February 2024 to 550,000 tonnes (t) against the 610,000 t seen in the previous month. While State-based mills are still nursing huge stockpiles, the private ones have been able to liquidate some amount.

Reasons for drop in inventory

Production cuts by tier-1 mills: Tier-1 mills effected production cuts in the current month, which sucked out 80,000-100,000 t of rebar inventory from the market.

Mills undertook production cuts impelled by a few reasons. One was to restore the supply-demand imbalance that had been plaguing the market for many months now. Two, mills were also forced to cut output as project prices of blast furnace-route rebar fell below the psychological 50k-mark to hover at INR 49,500-50,000/t ($597-603/t) FOR, while retail prices, ex-Mumbai, remained more or less stable at INR 51,000-52,000/t ($615-627/t). Three, the drop in prices was a function of the tepid demand scenario prevailing for some time now. Projects have lessened off-take ahead of the elections this year. Only those which are nearing completion are procuring.

IF mills see drop in inventory: The induction furnace (tier-2) mills, which command 65-70% share of the rebar market, naturally influence price dynamics of the tier-1 mills. IF mills too witnessed a drop in inventory in February compared to the 25-30% increase seen last month. As per sources, IF mills have seen stocks idling period dropping off to 7-day levels against the usual 10-15 days. This was aided by a few reasons. First, the IFs effected some amount of production cuts across regions except in western India, where the units operated at 100% capacity. Secondly, trade improved, which also encouraged these mills to lower the rebates.

Outlook

Prices of rebar sold to the projects segment have fallen to sub-50k levels, as already mentioned. However, sources feel, these will not drop further nor rise from the current levels as projects sales are limited at this juncture.

Resultantly, mills will be under cost pressure in the near term at least.

In such a scenario of lukewarm domestic demand and prices, mills are naturally interested in exploring export opportunities for billet/rebars.