India's steel, raw material prices rise m-o-m in Apr'24, but coking coal bucks trend. What lies ahead?

• Coking coal falls as Indian buyers remain stocked up
  
  
• Metallics pricier amid higher finished steel demand
  
  
• Sustained finished demand may support prices in short term
  
  

Morning Brief: Most steel and raw material prices up-trended m-o-m in April 2024, as mills cut production to restore supply-demand imbalance. This tightened supply, led to inventory depletion, and a spurt in the prices of finished steel and raw materials. But coking coal fell amid volatility, making Indian buyers cautious.

BigMint goes behind the scene:

Factors that influenced domestic steel, raw material prices in Apr'24

Coal

• Australian Premium HCC coking coal: Average Australian Premium HCC coking coal prices fell 13% m-o-m to $260/tonne (t) CFR India in April 2024 compared to $300/t in March 2024.
  
  

India's coking coal imports dropped primarily because of price volatility, which prompted buyers to adopt a cautious approach. Indian buyers had sufficient inventory which dented demand, resulting in the drop in imports and prices.

• Indexed port-side ex-Gangavaram prices of RB3 (4800 NAR) from South Africa rose 3% to INR 8,050/t in April 2024, from INR 7,830/t in March 2024. This same grade of thermal coal, CNF Gangavaram, rose even higher, by 13%, to $90/t last month from $80/t in March.
  
  

Non-coking coal prices picked up on buying interest from sponge players. Also, a derailment occurred in South Africa which temporarily hiked prices. Thermal coal prices also gained support from geopolitical tensions.

Ferro alloys

• Silico manganese 60:14: Prices of the bi-weekly 60:14 grade silico manganese index in Raipur rose 9% m-o-m to INR 71,860/t in April 2024 (INR 66,160/t in March). The price uptick was driven by an increase in raw material prices - MOIL's ore offers rose 6% for grades above Mn44% and 3% for below Mn44% grade amid hike in imported ore prices amidst supply constraints. Plus, there was robust export demand for silico manganese amid disruptions in Australian supplies.
  
  

Scraps and metallics

These moved up m-o-m while sponge iron in particular showed a sharp upswing.

• Pellet-based P-DRI: Pellet-based P-DRI, ex-Raipur, rose a smart 9% m-o-m to INR 29,070/t in April, compared to INR 26,600/t in March.
  
  
• CDRI mix: Prices of CDRI with a mix of 70% lumps, 30% fines, FeM 80% (+/-1), ex-Rourkela, rose even higher, by 12% m-o-m in April to INR 29,650/t (INR 26,590/t in March 2024).
  
  

In April, offers for sponge iron surged by INR 2,100-3,400/t, driven by higher South African coal prices. Imported RB3, which suits sponge producers' specifications was priced steeper last month. Prices of pellets, another raw material, was up 5% m-o-m. Competing raw materials like scrap and iron ore became pricier on the month. That apart, encouraged by significant steel demand from the domestic markets, sellers were encouraged to increase offers. Plus, demand from surrounding regions was also good, which allowed export offers to rise by $20-25/t m-o-m, CPT Raxaul and CPT Benapole.

• Steel grade pig iron: Pig iron prices in April 2024 upped 7% m-o-m to INR 40,660/t (INR 38,040/t in March 2024). In April, the pig iron market showed a notable uptrend, marked by significant price fluctuations across regions. Towards the end of the month, there was a moderate rise in foundry grade pig iron prices, especially in the northern region on the back of heightened demand for finished steel and the upward movement in other raw material prices.
  
  
• Domestic melting scrap HMS 80:20 (DAP-Mumbai): These increased a marginal 3% in April to INR 34,390/t against INR 33,340/t in the previous month. This increase was the result of shortage of material, following the announcement of increased vehicle inspections due to the elections. Plus, competing raw materials like sponge and pig iron also became pricier, supporting domestic scrap.
  
  
• Imported melting scrap: Prices of shredded melting scrap of Europe origin, in containers, CNF Nhava Sheva, rose a marginal 2% in April to $420/t ($410/t). Demand for imported scrap remained quite strong as buyers procured in both bulk and containers amid the shortage in domestic scrap. Plus, the uptick in demand for finished steel supported imported offers. Buyers actively procured fresh scrap to replenish stocks for the upcoming production cycles, anticipating increased demand post-elections. As a result several bulk orders from the US West Coast are set to arrive at Indian ports around end May-June, with prices ranging from $407-420/t CFR.
  
  

Iron ore

Iron ore lumps and pellets showed a mixed trend last month with fines dipping marginally while lumps and pellets rose slightly.

• Fines & lumps: Fe62% fines from Odisha eroded by 3% in April 2024 to INR 4,780/t (INR 4,950/t in March) while the Fe63% lumps (Odisha) gained 1% to INR 6,580/t (INR 6,530/t) m-o-m.
  
  
• Pellets: The bi-weekly pellets, DAP Raipur (grade 63%) upped 5% to INR 9,680/t (INR 9,190/t).
  
  

Fines prices fell amid lack of active buying on falling pellet prices. However, prices recovered in the second half of the month post-OMC's auction where bids rose m-o-m by INR 200-650/t with 1.83 mnt material sold in April. NMDC also increased its iron ore offers by INR 200-300/t for May delivery.

Pellet rates rose amid the sharp hike in sponge and finished steel prices. Decent transaction levels kept price supported.

Steel

This segment, comprising billets and finished products, saw an increase across-the-board.

• Billets: The ex-Raipur billet index increased 8% m-o-m to INR 42,860/t in April, 2024 (INR 39,830/t in March) amid increased finished steel demand and higher sponge iron prices.
  
  
• Rebar & wire rods: The ex-Mumbai BF-grade gained 5% m-o-m to INR 54,550/t (INR 52,120/t) in the period under review. Easing of BF rebar inventories in April, along with the production cuts, and uptick in demand helped to keep prices firm. The IF grade also rose 3% to INR 50,540/t (INR 52,120/t) while wire rods (ex-Durgapur) showed a 9% increase to INR 47,100/t (INR 43,310/t) last month. IF-grade materials rose because of the demand pull along with production calibration, and rise in raw material prices (sponge iron, billets and non-coking coal).
  
  
• HRC: Ex-Mumbai trade-level HRC prices remained flat m-o-m at INR 52,630/t (INR 52,750/t). Indian mills managed to arrest the price fall in HRCs by taking maintenance shutdowns of their hot strip mills, which reduced excess supply in the market and also withdrew export offers. These two factors kept prices on an even keel.
  
  

Outlook

Finished steel prices may see a further uptick in May, although there is a question mark on whether these will get absorbed in the market.

In raw materials, Australian coking coal may see further downward pressure amid competition from Russian sellers but thermal coal may uptrend due to increased offtake from sponge players.

Metallics like sponge, scrap, iron ore may stay see an uptrend on the expectation of active buying to meet restocking needs ahead of the onset of monsoons. Also, finished steel demand is expected to remain good post-elections, and inventory depletion.