India's steel index continues to lose steam, dumping probe fails to spark off markets

• Longs index shows marginal increase
  
  
• IF-rebar prices gain as mills cut output
  
  
• Demand may see rebound in Q3FY'25
  
  

Morning Brief: The BigMint India Steel Composite Index further edged down by 0.2% to 132.7 points for the week ending 23 August, 2024. On the other hand, the sub-indices comprising flats and longs were a "mixed bag" with the former inching down by 0.5% and the latter edging up by a meagre 0.1%, respectively.

Overall, the "down syndrome" has continued to plague Indian steel prices while the composite index continued to hover at more than three-and-a-half-year lows. This situation has brought back "pandemic nightmares" of late 2020-early 2021, when the index was stuck at similar levels.

Factors that impacted the index last week

BF rebar prices continue to fall: Trade-level blast furnace (BF) rebar prices witnessed a downtrend w-o-w amid subdued demand across markets, marking the 11th consecutive week of fall in prices. Currently, rebar prices (12-32mm, Fe500D, and Fe550D) in the trade segment dipped by INR 300/tonne ($4/t) to INR 49,600/t ($591/t) exy-Mumbai, excluding 18% GST. In the projects segment, prices were hovering in the range of INR 47,000-48,000/t ($560-572/t) landed Mumbai basis.

IF rebar prices up w-o-w despite market downturn: Induction furnace (IF) rebar manufacturers attempted to raise rebar prices by INR 300-500/t ($4-6/t) across markets at the start of the week, with trade prices following suit. However, the market, which has been on a downtrend for the past few weeks, has reached three-year lows. Meanwhile, mills have reduced production by 25% due to rising inventories. Prices began to decline later in the week, leading buyers to purchase on a need-only basis. IF-rebar inventories ranged from 12 to 15 days across markets. Trade-level IF-rebar prices rose by INR 700/t ($8/t) w-o-w to a weekly average of INR 45,800/t ($546/t) exw-Mumbai.

Domestic flat steel prices stable on subdued demand: Current prices of the hot rolled coil (HRC) (2.5-8mm, IS2062, Gr E250 Br) and cold rolled coil (CRC) (0.9mm, IS513 CR1) ex-Mumbai remained stable at INR 50,300/t and INR 57,400/t, respectively. All prices exclude 18% GST. The market for traded products experienced subdued demand following a prolonged weekend and the Rakshabandhan holiday. An anti-dumping investigation into imported hot-rolled flat products failed to stimulate an upturn. Excess inventory and a cautious buyer stance contributed to the market's limited activity.

Govt's anti-dumping investigation fails to improve market: The announcement of the anti-dumping investigation by the Indian government into Vietnam's steel dumping had no noticeable impact on the market. BigMint's cumulative import volumes, based on vessel line-up data, reached 401,413 t till 19 August 2024. This represents a decline from 636,651 t in July 2024. However, an additional 222,789 t are expected to arrive by the end of August, followed by another 114,245 t in the first week of September. Indian steel mills have continued to limit HRC exports to Southeast Asia and the Middle East due to intense competition from China and weak domestic demand in these regions. A market participant said: "Demand for steel products among traders has remained relatively flat. Buyers are taking a cautious approach, acquiring only essential quantities due to the surplus inventory throughout the supply chain. The anti-dumping investigation is unlikely to have a significant impact, given the high levels of inventory and the fact that domestic production and imports have outpaced demand." In similar vein, European buyers have also maintained a cautious stance during the summer.

Outlook

The current conditions are expected to persist in the short-term, as market fundamentals are unlikely to change soon, particularly due to China's aggressive export strategies and, of course the anti-dumping concerns in the global market which have hampered Indian steel mills' aspirations. However, some clarity on demand and prices may emerge with the start of the third quarter (October-December), by which time the monsoon is also expected to have receded.

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