India's steel index continues to fall; bearish trend may persist

• BF mills raise rebar list prices by up to INR 1,000/t
  
  
• IF rebar prices fall back again as demand eludes
  
  
• Flat steel continues to languish amid slack buying
  
  

Morning Brief: The BigMint India Steel Composite Index further edged down by 0.6% to 132.0 points for the week ending 30 August, 2024. Similarly, the sub-indices, comprising flats and longs, fell marginally by 0.7% and 0.5%, respectively. The India Flat Steel Composite Index closed the week at 132.7 points and the India Steel Long Composite Index, at 131.2 points.

Overall, it seems that the downward trend is here to stay for some time which will continue to afflict Indian steel prices. As a result, the composite index also continued to hover at more than three-and-a-half-year lows. It is worth mentioning here that the index was stuck at similar levels during late 2020-early 2021, when the Covid-19 pandemic wreaked havoc on the global steel industry.

Factors that impacted the index last week

Tier 1 mills raise BF rebar prices by up to INR 1,000/t: India's tier 1 mills raised list prices of blast furnace (BF) rebar by INR 750-1,000/tonne ($9-12/t) during the week. Current list prices are hovering at INR 50,000-51,000/t ($596-608/t) on landed basis. It may be noted here that mills had reduced prices earlier this month. Following the current list price hike, trade-level rebars witnessed a w-o-w rise across major markets. However, buying activities continued to remain weak in the trade segment. Currently, rebar (12-32mm, Fe500D, and Fe550D) in the trade segment rose by INR 700/t ($8/t) w-o-w to INR 50,300/t ($599/t) exy-Mumbai, excluding 18% GST. In the projects segment, prices were hovering in the range of INR 48,000-49,000/t ($572-584/t) landed Mumbai basis.

IF rebar prices remain range-bound w-o-w: Interestingly, induction furnace (IF) rebar manufacturers attempted to raise prices during the start of the week. However, due to weak demand, prices ricocheted back. Manufacturers offered trade discounts based on inquiries, with buying activities remaining need-based throughout the week. Meanwhile, mills have reduced production by 20-25% due to rising inventories, which are currently idling for 12-15 days across markets. Trade-level IF-rebar prices remained stable w-o-w at INR 45,800/t ($545/t) exw-Mumbai. The price gap between BF-IF rebars stood around INR 4,000-4,500/t ($48-54/t) in the Mumbai market. Notably, IF rebars enjoy 65-70% share of the market.

Domestic flat steel prices fall on limited trade: Current prices of hot-rolled coils (HRCs) (2.5-8mm, IS2062, Gr E250 Br) ex-Mumbai fell by INR 300/t ($3.57/t) to INR 50,300/t ($599/t). Also, cold-rolled coils (CRCs) (0.9mm, IS513 CR1) ex-Mumbai fell by INR 100/t ($1.19/t) to INR 57,300/t ($682/t). All prices exclude 18% GST. The market was characterised by surplus inventory and cautious buyer sentiment, leading to limited trading activity. The upcoming mill list price announcement has prompted a wait-and-see approach among participants.

Indian HRC export market remains quiet: BigMint's cumulative import volumes, based on vessel line-up data, reached 484,902 t till 26 August against 636,651 t in July 2024, with an additional 192,477 t expected to arrive by end of August this year and another 3,18,572 t in the first half of September 2024.

Amid a weakening global market, Indian steel mills have continued to withhold HRC export offers to Southeast Asia and the Middle East. Although HRC offers to Europe remained unchanged w-o-w, no firm deals were concluded due to cautious EU buyers and the partial return of market participants from summer vacation.

Outlook

In general, the outlook for the Indian steel market remains challenging in the short term, with continued downward pressure on prices likely. Factors such as rising inventories, weak domestic and export demand, and cautious market sentiment are expected to persist, keeping prices range-bound or under pressure. The market will closely watch upcoming mill price announcements and potential shifts in global demand to gauge any signs of recovery or further deterioration. However, unless there is a notable improvement in demand or a strategic shift in supply management, the current bearish trend may continue to dominate the market landscape for the foreseeable future.

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.