Steel index remains flat w-o-w; Buyers cautious amid supply tightness

• BF-grades rebar prices rise slightly amid material shortage
  
  
• Flats see mixed trend, export offers remain flat
  
  
• Prices may remain supported by demand in short term
  
  

Morning Brief: The India Steel Composite Index remained stable for the week ending 15 September, 2023. It closed up a negligible 0.1% w-o-w at 148.50 against the previous close of 148.30.

The India Long Steel Composite Index remained inert, closing at 145.80 points, the level it had closed at in the previous week.

The India Flat Steel Composite Index, also remained more or less flat at 151.30 points (151).

Factors that influenced the index last week

Longs

IF-route rebar prices stable: A key factor that kept the index stable was the range-bound trend in the induction furnace (IF) segment. Since IF-route rebars enjoy 65-70% of the market, the demand-supply and price dynamics in this segment have a profound influence on blast furnace-route rebar prices as well. Weekly average prices of IF rebars edged down by INR 200/t ($2/t) w-o-w to INR 51,800/t ($623/t) exw-Mumbai. Prices as on 15 September were at INR 51,700/t ($622/t) exw-Mumbai. Priced were volatile last week, forcing buyers to do need-based procurement. This resultantly led to limited spot bookings.

Shortage supports trade-level BF-route prices: Trade-level blast furnace-made rebars saw a price uptick of INR 500/t ($6/t) amid a shortage of material in the market. Current prices are at INR 57,000/t ($685/t), exy-Mumbai excluding 18% GST. On cue, prices in the projects segment also rose to INR 55,000-55,500/t ($661-667/t) FOR Mumbai against INR 54,500-55,000/t ($655-661/t) in the previous week, minus GST.

The price rise in the above two segments balanced out the fall in IF-grade prices.

Flats

Mixed price trends in flats: Trade-level prices of finished flat products edged up further by INR 200-500/t ($2-6/t) this week in the key markets of Mumbai and Faridabad. However, coated flat steel products held ground this week. This again balanced out the overall impact on the index.

But the hectic buying seen over the past few weeks has given way to caution.

"Trades are happening in the spot market, but the volumes are restricted to urgent requirements only. Buyers are still exercising caution and keeping their stocks lean," informed a source at the distributor level.

Overseas buyers cautious: On the exports front, overseas buyers are being cautious, waiting to see which way global prices take a turn. As a result, HRC offers to Europe remained flat w-o-w at $690-695/t CFR Antwerp, Europe. Mills are again holding back offers to the Middle East and Vietnam markets. SteelMint's India HRC (SAE1006) export index stood unchanged at $580/t FOB east coast India last week.

Outlook

Sensing good domestic demand, the market buzz is, tier-1 mills may announce an increase of INR 1,000-1,500/t ($12-18/t) in HRC-CRC prices for October sales. Sources also indicated that mills may be encouraged to raise prices because of the shortage of material in the market. There may be a supply crunch in the mother coil, HRC, as mills seem to be diverting these towards making value-added products with an eye on the infra space, especially pre-engineered buildings (PEBs), where requirement of pipes and tubes is high.

In longs, mills, large and small, may also be encouraged to raise prices if demand is supportive in the short term since there is a supply crunch here too.

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 but a trend of the market. 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.