Key takeaways of Webinar on Indian Flat Steel : Short and Medium term outlook

The key takeaways of the Webinar on Indian Flat Steel : Short & Medium term outlook are as follows :

1.Price increase due to cost push & strong domestic demand: The market is observing a steep hike in prices of flat steel on account of rising iron ore prices and strong domestic demand. Prices have reached 2008 levels and even the global markets are operating at high prices. Steel prices follow the scrap price trend and the uptick in scrap prices in the month of Nov'20 clearly indicates more room for price hike.

2.Depletion of stocks leading to supply crunch: The pandemic struck a little late in India and mills focused on reducing the production due to the uncertainty, this led to supply crunch and caused a steep hike in prices.

3.Q4 FY21 to be driven by auto, white goods and agricultural sector: The market sentiments indicate that the demand from auto, white goods and agricultural sector will sustain and drive the steel prices. Demand from the construction sector is likely to pick up from Q1 FY'22.

4.MSME sector a key focus area for mills: MSME sector will not be able to cope up with the rising prices and strategy needs to be incorporated to cater to the demand by MSME. JSW has set up a team to formulate a strategy for MSME.

5.Auto demand to drive CRCA prices: The new norm of social distancing is leading customers to avoid public transport and move towards owning a vehicle, leading to CRCA peeking from late Q3 FY'21. CRCA price will have an edge over other flat steel price because of a V-shaped recovery from the auto sector. The Q4 FY '21 is also likely to see a price hike of around INR 2000 - 3000 t across flat products. The CC (color coated)and Galvanized coils are also likely to peak during Q4 FY 21 on strong demand from white goods sector.

6.LIG housing segment to drive demand: The low-income group housing segment will drive steel in tier II and tier III markets. The demand will pick up from April '20 onwards.

7.JSW ready to serve the demand from auto majors: JSW is facing the challenge of having readily available stocks to be delivered to auto majors because of a V-shaped demand. One of their lines will be modified from a reversible mill to a PLTCM in Q4 FY21 to cater to a demand. The reduction in exports will also cater to demand from the auto sector.

8.Capacity utilization and inventory level: Currently JSW is operating at 88% capacity utilization and in Q4 FY '21 the aim is to bring it to 90%. At the moment JSW is operating with only 15 days inventory and it's a challenge to keep 30 days inventory in the present scenario. AMNS is operating at around 95% capacity utilization and the inventory level is at around 80,000 to 1,00,000 t at the moment.

9.Domestic market the key priority for mills: Mills are primarily looking only to cater to the demand from the domestic market. AMNS is looking at around 5-10 % production for exports in the foreseeable future. JSW is also reducing its exports and FY21 exports may come down to around 3.5 mn t.

10.Imports to remain low in the foreseeable future: Imports are down given the uncertainty in the current market scenario and also import duty pushes the end user to look at domestic mills. Most of the foreign mills have not registered under the steel quality control order, thus if the domestic mills are able to supply stocks consistently, the end use will prefer domestic material.