India's steel prices continue to downtrend. Composite index touches 13-week low

• Index enters fifth week of continuous fall
  
  
• Export offers to EU resume but deals elude
  
  
• Short term likely to remain range-bound
  
  

Morning Brief: The falling streak in India's steel prices entered its fifth week. The BigMint India Steel Composite Index dropped further by 1% to close the week ended 12 July, 2024 at 139 points. This is a 13-week low since 12 April, 2024's 139.7.

The longs index fell by 1.2% w-o-w and flats, by a milder nearly 1%. Dull domestic buying trends persisted across steel categories and markets, impacted by global trends and rains and quality issues for longs in particular.

Factors that impacted the index last week

BF rebar price fall continues in dull trade: Trade-level blast furnace (BF) rebar prices continued to downtrend last week. Prices fell further by INR 800-1,200/t ($10-14/t) during the week amid dull buying activity in the domestic market. Buyers have become cautious in procuring material amid the continuous fall in prices.

BF-route rebar prices (12-32mm) in the trade segment, minus 18% GST, dropped by INR 900/t ($11/t) w-o-w to INR 54,300/t ($650/t) exy-Mumbai.

In the projects segment, prices fell by INR 500-1,000/t ($6-12/t) to INR 52,500-53,500/t ($628-640/t) FOR Mumbai. End-users did only need-based buying.

IF mills face quality issues, lack of raw material support: Induction furnace (IF)-grade rebar trade-level prices fell by a steep INR 1,300/t ($16/t) w-o-w to INR 46,800/t ($560/t) ex-Mumbai. Demand continued to remain subdued amid the monsoons, which resulted in slow construction activities. But, quality issues are also dissuading buyers. The recent show-cause notice to IF mills on quality maintenance, is taking a toll on IF rebar procurement too. Prices of raw material and semi-finished like billet and sponge iron also declined, further withdrawing price support. The Raipur billet index touched a 5-month low in the previous week.

Dull demand, drop in global prices pressure flats: Hot-rolled coil (HRC) prices overall declined by INR 200-800/t ($2-10/t) across regions to INR 52,900-55,500/t ($633-664/t). But, cold-rolled (CR) coil prices were somewhat stable at INR 57,500-63,400/t ($688-759/t). Benchnmark trade-level HRC prices, ex-Mumbai, remained stable w-o-w at INR 53,000/t ($634/t) on 9 July 2024. However, CRC prices dipped slightly by INR 200/t ($2/t) to INR 59,600/t ($713/t) during the same period.

However, these prices levels failed to lift up market sentiments. Prices remained under pressure because of dull demand, a decline in overseas prices and import pressures.

Baosteel cut its HRC prices for August sales by RMB 100/t ($14/t) while Vietnamese mills retained their current price levels.

Imports continue to be higher than exports: Imports continued to worry Indian flat steel producers. India's bulk HRC and plate imports are continuing to outpace exports. An estimated additional 126,417 tonnes (t) of imports are expected by end-July whereas exports are likely to hover around 45,000 t.

EU export offers resume but deals elude: Indian mills resumed their export offers to Europe but continued to withhold for the Middle East and Vietnam because of the downward Chinese price pressure.

Chinese offers to the Middle East remained range-bound w-o-w at $555-560/t CFR. Offers to Vietnam, however, dipped further by $5/t to $525-530/t CFR. Obviously, such levels are not viable for Indian mills.

On the other hand, offers to Europe hovered at $650-660/t CFR Antwerp, making these far more attractive. However, no deals were concluded, it seems, as EU buyers are cautious amid stagnant domestic prices and dull demand pull amid the current summer holiday period. Restocking has not been seen in the EU market at present.

Outlook

Domestic prices may continue to face downward pressure or remain range-bound in the short term as the present factors gripping the market may not ease soon. In exports, some restocking is expected from the EU, which may lift market sentiments.

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.