Rebar inventories with tier-1 mills touch 3-month low

Rebar inventories with tier-1 mills hit a three-month low of around 500,000 tonnes (t) in early-March 2024. Similar levels were last seen in early-December 2023, as per BigMint records.

It may be recalled that rebar inventories started falling from February itself after climbing up by around m-o-m 8% in January.

Reason for falling inventories

Production cuts balance out demand-supply dynamics: A key reason is, of course, the production cuts that tier-1 mills opted in February to essentially correct the supply glut in the market amid lacklustre demand. The move paid off because rebar production was down by 80,000-100,000 tonnes last month. The buzz is that some more production cuts are expected in March too. Tier-1 mills enjoy 30-35% share of the Indian rebar market.

IF-grade rebar sees demand traction: Induction furnace (IF)-made rebar saw some demand traction in the latter half of February and so far into March. The reasons for the same were multiple. One, project closures saw an escalation in demand which depleted IF-grade inventories. Thus, from 10-15 days idling time, these dropped to around 7 days last month. Two, because of the narrowing price gap between IF- and BF-material, buyers preferred to buy the former. Three, the liquidity crunch which had gripped the market for many months, showed some easing, which allowed buyers to make purchases.

Price scenario

The production cuts allowed prices to remain stable too. For instance, trade-level BF rebar prices were stable m-o-m at INR 51,800/t ($626/t) in February. Latest assessment shows a nominal INR 300/t ($4/t) w-o-w increase to INR 51,900/t ($627/t) exy-Mumbai.

Projects segment prices for BF rebars were at INR 49,500-50,000/t ($598-604/t) in February against INR 50,000-50,500/t ($604-610/t) in January.

IF-route rebars, which command almost 70% of the market, have a deep influence on tier-1 mills' rebar pricing. IF rebar trade prices dropped by INR 500/t ($6/t) m-o-m to INR 48,200/t ($583/t) in February. Current week's assessment of IF rebars was at INR 49,500/t ($598/t) exw-Mumbai.

Outlook

Rebar prices have stabilized now and are not likely to fall further. Rather, they are likely to sustain.

The tier-2 mills also have less inventories, which will have a spin-off impact on tier-1 rebar stocks and this will also help to keep prices firm.

IF mills are unlikely to undertake production cuts in March, BigMint heard, as inventories have depleted amid destocking.

Tier-2 mills are also going through cost pressures as imported scrap, coal, iron ore and pellet prices are showing an uptrend. In fact, imported scrap bookings have stopped as buyers wait and watch.