India's steel, raw material price slide continues in Aug amid weak demand, high inventories

• Coking coal drops sharply on supply glut, weak demand
  
  
• Iron ore slides as buyers stay well-stocked from auctions
  
  
• Near-term prices may trend lower amid global uncertainties
  
  

Morning Brief: The downtrend in India's steel and raw material prices continued into August 2024, a month which saw some "deep troughs" akin to July this year. Coking coal and iron ore lumps were the worst hit. In fact, steel and raw material prices dropped across-the-board amid sustained weak domestic demand, high inventory levels, seasonal monsoon effects, global economic uncertainties, and strategic price adjustments by mills. BigMint goes behind the scene:

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

Coal

• Australian premium HCC coal: Average Australian premium HCC coking coal prices slumped by s sharp 15% m-o-m to $220/tonne (t) CFR India in August, 2024 from $260/t in July. The slump was driven by weak demand from Indian steel mills, seasonal and logistical impacts from the monsoon, increased global supply from Australia, competitive pricing from other origins, currency fluctuations, a weaker global economic outlook, and market speculation. These combined factors created an environment where coking coal prices faced significant downward pressure throughout the month.
  
  
• Indexed port-side ex-Gangavaram prices of RB3 (4800 NAR) from South Africa dropped 3% to INR 7,720 in August 2024 from INR 7,940 in July 2024. The decline was primarily due to weak domestic demand, increased inventory levels, monsoon-related disruptions, and competitive pressure from international suppliers. Meanwhile, the CNF Gangavaram prices of the same grade remained unchanged m-o-m at $90/t in August 2024 due to stable freight rates, suppliers' pricing strategies, balanced international markets, and currency stability.
  
  

Ferro alloys

• Silico manganese 60:14: Prices of the daily 60:14 grade silico manganese index in Raipur fell by 3% to INR 68,810/t in August 2024 (INR 70,950/t in July). This decline can be attributed to domestic silico manganese prices hovering at a four-month low. The benchmark SiMn 60-14 from Raipur is hovering at around INR 68,400/t. These levels were last seen in early April 2024. One key reason for the drastic fall in prices is the decline in exports of silico manganese. Around 50% of the total domestic manganese alloys production gets exported. Thus, a dull overseas market has obviously weakened domestic prices. MOIL had reduced domestic ore prices for August 2024 sales by up to 27%.
  
  

Scraps and metallics

These lost ground amid weak finished demand and lower coal prices.

• Pellet-based PDRI: Pellet-based P-DRI, ex-Raipur, slipped by 4% m-o-m to INR 24,670/t in August, compared to INR 25,570/t in July.
  
  
• CDRI mix: Prices of CDRI with a mix of 70% lumps, 30% fines, FeM 80% (+/-1), ex-Rourkela inched down by 1% m-o-m in August to INR 25,960/t (INR 26,300/t in July). Prices fell because Indian steel mills, especially those using direct reduced iron (DRI) in electric arc furnaces (EAF) or induction furnaces (IF), reduced their production due to weaker demand for steel. This led to a decline in the consumption of both pellet-based and coal-based DRI, exerting downward pressure on prices. Moreover, the monsoon season typically slows down construction and industrial activities in India, reducing the demand for steel and, consequently, the raw materials used in its production, such as DRI.
  
  
• Steel grade pig iron: Pig iron prices in August 2024 slipped 2% m-o-m to INR 36,780/t (INR 37,710/t in July). Last month, the domestic pig iron market experienced a slight increase in demand, primarily driven by lower prices and scrap shortages. However, despite this increased demand, prices slightly declined due to weak demand for finished products, reflecting the market's overall stagnation.
  
  
• Domestic melting scrap (HMS 80:20 ex-Mumbai): These edged down by 2% m-o-m to INR 32,740/t in August 2024 as compared to INR 33,270/t in July. Market sources attributed this decline to moderate trade activity in semi-finished and finished steel, influenced by the ongoing monsoon, which resulted in lower scrap prices compared to the previous month.
  
  
• Imported containerised melting scrap: Prices of imported shredded scrap in containers from Europe also slipped 2% in August to $400/t CNF Nhava Sheva ($410/t in July). It is worth mentioning here that India's imported shredded offers from the UK/Europe saw a $10/t m-o-m correction due to weak buying interest. This was largely driven by the availability of more cost-effective domestic sponge iron and scrap. Additionally, the monsoon in August dampened steel demand, further reducing overall scrap consumption in the sector.
  
  

Iron ore

Iron ore fines and pellet prices further dropped in August amid slack steel demand.

• Fines & lumps: Fe62% fines prices from Odisha eroded by 5% in August 2024 to INR 4,310/t (INR 4,540/t in July) while the Fe63% lumps (Odisha) slipped a deeper 7% m-o-m to INR 5,780/t (INR 6,220/t). Iron ore prices in Odisha remained uncertain, as miners are yet to revise the offers for fresh deals. But trading remained moderate, as major buyers had already purchased sufficient material at OMC's auction and remained cautious about new transactions. OMC sold around 1.5 mnt fines with bids (weighted average) falling by INR 500/t m-o-m in the August auction. NMDC Limited also reduced list prices of iron ore CLO and fines by INR 600/t and INR 500/t. These factors adversely impacted prices of fines and lumps. In fact, NMDC Chhattisgarh fines prices have hit ten-month lows as these levels were last seen in October, 2023.
  
  
• Pellets: The bi-weekly pellets index DAP Raipur (grade 63%), dropped marginally by 2% to INR 8,970/t in August (INR 9,180/t). Notably, the monthly average domestic pellet index, PELLEX, dropped by INR 200/t m-o-m in August to INR 9,000/t DAP Raipur. Competitive pellet prices from eastern India, decline in global prices and a sharp drop in sponge P-DRI prices kept pellet prices under pressure. Hence, the pellets index DAP Raipur witnessed this marginal drop.
  
  

Steel

This segment, comprising billets and finished products, saw prices fall as demand remained slack across-the-board.

• Billets: The ex-Raipur billet index inched down by 2% m-o-m to INR 38,500/t in August 2024 (INR 39,370/t in July).
  
  
• Rebar & wire rods: The ex-Mumbai BF-grade rebar lost 6% m-o-m to INR 50,180/t (INR 53,380/t in July) in the period under review. On the other hand, the IF grade dropped 3% to INR 45,270/t (INR 46,710/t) while wire rods (ex-Durgapur) showed a 2% decline to INR 42,160/t (INR 43,030/t) last month.
  
  

BF longs were impacted by subdued demand across markets. Furthermore, August is part of the monsoon season in India, which typically brings a slowdown in construction activities, especially in outdoor projects. This seasonal factor led to a reduction in demand for construction materials like rebar and wire rods, directly impacting their prices.

IF rebar manufacturers attempted to raise rebar prices by INR 300-500/t across various markets during the last phase of August with trade prices following suit. However, the market, which has been on a downtrend for the past few weeks, has reached three-year lows. These factors combined to create an oversupply, resulting in price reductions across different long steel products in the Indian market.

• HRC: Ex-Mumbai trade-level HRC prices lost 3% m-o-m at INR 50,540/t (INR 52,270/t). Some Indian flat steel producers reduced list prices of hot rolled coils (HRCs) and cold rolled coils (CRCs) by around INR 1,000-2,000/t ($12-24/t) m-o-m at the beginning of last month. These mills were compelled to reduce prices because of the growing preference for cheaper imports from Vietnam and China. In addition, weak domestic and export demand played spoilsport.
  
  

Outlook

The near-term outlook for India's steel and raw material market remains cautious, with continued pressure on prices due to weak demand, high inventories, global economic uncertainties, and competitive pressures from imports. While there may be some seasonal demand recovery post-monsoon, it is unlikely to be strong enough to offset the current bearish trends fully. Further price declines are possible unless there is a significant improvement in demand dynamics or a reduction in excess supply.