India's steel, raw material prices rise m-o-m in May'24. What lies ahead?

• S. African thermal coal spurts amid logistics issues
  
  
• Pellets up on monsoon restocking, NMDC output dip
  
  
• Tight availability props up BF-route rebar offers
  
  

Morning Brief: All steel and raw material prices up-trended m-o-m in May, 2024 as the supply-demand imbalance was restored after mills went ahead with production cuts. Imported South African coal rose by 11%, followed by pellets, at 9%. Imported scrap remained flat m-o-m.

BigMint goes behind the scenes:

Factors that drove up domestic steel and raw material prices in May'24

Coal

• Australian Premium HCC coking coal: Average Australian Premium HCC coking coal prices remained unchanged m-o-m at $260/tonne (t) CFR India in May, 2024. Prices here have been largely stable on subdued demand from major Asian buyers.
  
  
• Indexed port-side ex-Gangavaram prices of RB3 (4800 NAR) from South Africa rose by 3% to INR 8,300/t in May 2024 from INR 8,050/t in April 2024. This same grade of thermal coal, CNF Gangavaram rose even higher by 11% to $100/t in May 2024 from $90/t in April 2024. Non-coking coal prices increased due to train derailment at a South African railway line. One of the lines is yet to resume its daily operations. In addition, Richards Bay Coal Terminal's (RBCT's) scheduled maintenance is expected to keep prices firm.
  
  

Ferro alloys

• Silico manganese 60:14: Prices of the daily 60:14 grade silico manganese index in Raipur surged by 25% to INR 89,900/t in May 2024 from INR 71,860/t in April 2024. This jump is linked to rising manganese ore prices (25-40% increase for domestic and 35% for imported ore), driven by a global manganese ore shortage. Higher manganese ore costs, a key input, inflated production costs for smelters, pushing up silico manganese prices.
  
  

Scraps and metallics

These moved up m-o-m while pig iron and melting scrap DAP-Mumbai rose by 5%.

• Pellet based PDRI: Pellet-based P-DRI, ex-Raipur, rose a marginal 1% m-o-m to INR 29,250/t in May, compared to INR 29,070/t in April.
  
  
• CDRI mix: Prices of CDRI with a mix of 70% lumps, 30% fines, FeM 80% (+/-1), ex-Rourkela inched up by 3% m-o-m in May to INR 30,460/t (INR 29,650/t in April 2024).
  
  

Offers fell by INR 150-1,250/t due to limited demand across regions, influenced by fluctuating steel prices which left market participants cautious and resulted in limited buying interest. Indian DRI export offers increased by $3/t m-o-m, reaching $406/t CPT Raxaul.

• Steel grade pig iron: Pig iron prices in May 2024 upped 5% m-o-m to INR 42,680 (INR 40,660/t in April 2024). In the initial month, domestic pig iron prices rose slightly, driven by robust demand for the finished product. However, prices experienced a decline towards the month end following reports of a 100,000 import deal from Russia. In SAIL's auction (RSP, DSP, and BSP), bid prices consistently dropped m-o-m due to lack of demand at existing price levels.
  
  

The Durgapur market experienced a decrease in prices of both basic and foundry grades due to high supply and low demand. Prices dropped by INR 1,500-2,000/t. The bookings of imported material at very low prices, coupled with an increase in scrap prices, further contributed to the m-o-m correction in pig iron prices.

• Domestic melting scrap (HMS 80:20 ex-Mumbai): These increased by 5% m-o-m to INR 36,250/t in May 2024 as compared to INR 34,390/t in April 2024. This rise was attributed to a material shortage following increased vehicle inspections due to the Assembly elections held in May as well as rising prices of other ferrous feedstock like sponge iron and pig iron.
  
  
• Imported melting scrap: Turkiye's imported scrap prices fell sharply in the first half of the month on weaker rebar sales. However, in the second half, frequent deals from Turkish steelmakers kept the offer levels largely stable at $378-380/t for US origin HMS(80:20) bulk. As a result, around 60% of the trade volume happened in the second half of the month. In contrast to Turkiye, India's imported shredded scrap prices from major suppliers (the US, the UK, and Europe) remained stable in May. However, prices of HMS (80:20) from these same regions rose by $5-10/t in May compared to April. This increase reflects rising collection costs, higher freight rates, and strong local demand in supplier countries, despite weak demand in South Asian markets like India.
  
  

Iron ore

Iron ore lumps and pellets showed a positive trend last month with fines, lumps and pellets increasing by 7%, 8% and 9% m-o-m, respectively.

• Fines & lumps: Fe62% fines from Odisha increased by 7% in May 2024 to INR 5,100/t (INR 4,780/t in April) while the Fe63% lumps (Odisha) gained 8% m-o-m to INR 7,100/t (INR 6,580/t). Restocking before monsoon and drop in NMDC's production and dispatches due to workers' slowdown amid wage revision supported iron ore prices.
  
  
• Pellets: The bi-weekly pellets DAP Raipur (grade 63%) upped 9% to INR 10,530/t (INR 9,680/t). OMC's auction fetched active participation. In addition, global iron ore prices rose which supported iron ore export bookings from India. Meanwhile, rise in iron ore prices pushed up pellet offers.
  
  

Steel

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

• Billets: The ex-Raipur billet index increased 4% m-o-m to INR 44, 540/t in May 2024 (INR 42,860/t in April). The billet index in Raipur touched INR 45,550/t ex-works, marking a one-year high on 6 May, 2024. Domestic billet prices have generally declined by INR 150-1,500/t across almost all key regions due to limited finished steel sales recorded in May. India's billet makers saw an 11% rise in the conversion spread from sponge iron (PDRI) to billets in Raipur. An increase in electricity charges for the industrial region by INR 0.25 paise per kW/h in the Chhattisgarh region is expected to push up billet prices.
  
  
• Rebar & wire rods: The ex-Mumbai BF-grade rebar gained 7% m-o-m at INR 58,340/t (INR 54,550/t in April) in the period under review. Supply tightness supported BF-route rebar offers as RINL faced coal procurement issues due to the strike at Gangavaram Port. The strike was resolved later in the month but production shortfall supported rebar prices despite demand being slow in construction due to elections and summer. The IF grade also rose 5% to INR 52,920/t (INR 50,540/t) while wire rods (ex-Durgapur) showed a 2% increase to INR 47,830/t (INR 47,100/t) last month.
  
  
• HRC: Ex-Mumbai trade-level HRC prices rose by 3% m-o-m to INR 54,100/t (INR 52,630/t). Domestic HRC prices remained largely range-bound amid weak demand in traders' segment. Indian mills continued to hold HRC, CRC export offers on limited allocations due to scheduled maintenance shutdowns. Indian HRC import bookings picked up as the BIS licence for Vietnam's Formosa was renewed. HRC import bookings were also seen from China and Japan.
  
  

Outlook

Finished steel prices may see a further uptick in June although there is a question mark on whether these will get absorbed in the market. In raw materials, Australian coking coal prices are expected to be in a narrow range amid constraint for July laycan cargoes accompanied by falling demand. Also, the met coke safeguard directive keeps buyers uncertain on whether the import restrictions will be imposed or annulled. On the other hand, metallics like sponge, scrap, and iron ore may see an uptrend as finished steel demand is expected to remain good post-election results and inventory depletion.

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