Longs pull India steel index into positive terrain after 10 weeks; flats still weak

• Longs perform better as pre-monsoon stocking continues
  
  
• Flats sentiments subdued in trade segment, exports
  
  
• Rumours of Russian HRC imports unnerve mills
  
  
• Prices to remain under pressure in upcoming month
  
  

Morning Brief: After hovering in negative territory for 10 weeks, the SteelMint India Steel Composite Index pulled back into positive zone on 24 June, with a bit of help from long products. The index inched up 0.04% to 158.7 points from 158 points in the previous week.

The India Flat Steel Composite Index lost 1.92% to end at 158.8 points against 161.1 points in the previous week. However, it was long which put up a better show, moving up 2.19% w-o-w.

Why did longs sustain performance w-o-w?

IF-route prices up on pre-monsoon buying: The longs segment showed a mixed trend w-o-w. Blast furnace route rebar prices dropped by INR 800/t to INR 58,800/t exy-Mumbai.

However, the induction (IF) route material fared better, rising by INR 400/t to INR 53,100/t, exy-Mumbai. Across other regions, IF-grade prices rose by up to INR 1,500/t w-o-w although pockets in northern and western regions saw marginal drops by up to INR 300/t.

Prices overall sustained their firmness on continued pre-monsoon buying from the infrastructure construction segment as inventory depletion was observed in some end-user yards.

Sentiments still flat for flat steel

Trade segment inactive: In flats, trade segment prices continued to remain subdued amid lacklustre domestic demand. In fact, prices of hot-rolled coils (HRCs) and plates dropped to levels last seen in early April 2021.

Slow offtake in materials kept distributors away from stocking in bulk quantities. This led to lean inventory levels with both end-users and distributors.

Sellers want to avoid locking up funds in inventory that is not moving and avert losses amid continuously declining prices.

Moreover, with the month-end closing in, distributors are keenly awaiting price announcement from mills for July deliveries.

All quiet on exports front: On the exports front, Indian steel mills continued to struggle in clinching deals for boron-added HRCs. Mills are still reeling under the recently-imposed 15% export tax impact.

SteelMint's India HRC (SAE1006) export index dropped a further $23/t w-o-w to $700/t FOB east coast India. No deals were heard concluded this week.

Russian imported HRC rumours dampen sentiments: SteelMint heard that some imported HRC cargoes were booked from Russia at around $640-650/t, CFR India. The reason for the imports was "very cheap offers from Russia". However, the news could not be confirmed even at the time of publishing this report. Nor could it be confirmed whether the imports were for a trading house or end-user. Nonetheless, the rumours have further dampened market sentiments in flats.

Outlook
Prices, especially for flat steel, are likely to remain under pressure in July.

Longs may feel pressure returning as the monsoon sets in well across the country in the coming days while flats demand turnaround, especially in exports, is not seen anytime soon amid weak fundamentals.

The 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.

SteelMint 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. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, SteelMint 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. For details click to view the methodology document.