Steel index stages smart rally but demand still eludes. What lies ahead?

• BF rebar prices get a boost from IF rally
  
  
• Flats positive on festive demand pull
  
  
• Buyers may remain cautious in near term
  
  

Morning Brief: Steel prices staged a smart rally after hovering in the red zone for almost five months and then recouping slightly in the previous week. In actuality, these prices are still at near-four-year lows. But, on 4 October, 2024, the BigMint India Composite Steel Index rose a significant 2.40% to close at 134.40 points. It may be mentioned the index had passed this point in the first week of August while hurtling down to 131 levels.

Importantly, the flats index rose almost 2% after an 18-week bear grip. Longs fared even better, spurting a generous 4%.

Factors that impacted the index last week

Primary mills raise list tags amid tight supply: Indian primary mills raised rebar list prices by up to INR 2,000/tonne (t) ($24/t) for early-October 2024 deliveries, sources informed BigMint. Post-revision, list prices hovered in the range of INR 52,000-53,000/t ($619-631/t) on landed basis. It should be noted that mills had announced interim price hikes in the previous month too. The hike last week was mainly fuelled by the increase in induction furnace rebar prices.

Trade segment follows suit: The trade segment followed suit by raising blast furnace (BF) rebar prices a substantial INR 1,900/t ($23/t) w-o-w to INR 52,400/t ($624/t) exy-Mumbai w-o-w, as per BigMint's assessment on 4 October, minus the 18% GST.

In the project segment, prices spurted by INR 2,000/t ($24/t) w-o-w to INR 51,000-52,000/t ($607-619/t) FOR Mumbai.

Demand in the trade segment, however, was weak. The price rise was fuelled by a 1) Increase in BF and IF segment prices 2) positive market sentiments ahead of the peak demand season that has set in from October.

IF mills hike offers on improved buying: Induction furnace (IF)-route rebar increased by INR 2,100/t ($25/t) w-o-w to INR 48,500/t ($577/t) exw-Mumbai last Friday. Rebar trade offers witnessed an uptrend w-o-w amid improved buying activities and a rise in raw material and semi-finished prices across markets. Initially, manufacturers raised their list prices, following which they reduced discounts considering the market scenario.

Flats rise but buying weak at higher end of price spectrum: There was a market buzz that tier-1 mills had raised list prices of benchmark hot rolled coils (HRCs) and cold rolled coils (CRCs) by INR 500-1,500/tonne (t) ($6-18/t) for October 2024 sales. Post-hike, HRCs stood at INR 47,000-50,000/t ($559-595/t) exy-Mumbai, and CRCs, at INR 53,000-57,000/t ($631-678/t). However, BigMint could not confirm this news at the time of publishing this article. These prices exclude GST of 18%.

On cue, trade-level HRC-CRC prices also went north by INR 700-1,400/t ($9-17/t). BigMint's benchmark assessment shows trade-level benchmark HRCs rose by INR 1,400/t ($17/t) w-o-w to INR 48,400/t ($576/t) on 4 October 2024 and CRCs by INR 700/t ($8/t) to INR 55,800/t ($664/t), minus the 18% GST.

However, as with rebar, in flats too, demand was inherently weak. It was heard that not much offtake happened at the higher end of the price spectrum. Buyers continued to resort to need-based procurements. But sellers are upbeat on improvement in demand ahead of the festive season.

Imports up, exports a no-show: In flats, sellers did not have much room for manoeuvre as imports remained high while exports were still a non-performing segment. The cumulative import volume in September 2024 touched 776,835 t against 627,426 t in August, and 636,651 t July. An additional 246,902 t is expected to arrive in October.

In exports, with China away on a week-long holiday, global markets also lost shine, aided by escalating geopolitical tensions and ongoing dumping probes. Indian mills continued to remain out of the Middle East and Vietnam markets while Europe was dull.

Raw materials support price hikes: NMDC, India's largest merchant iron ore mining company, raised list prices of iron ore calibrated lump ore (CLO) and fines by INR 300/t ($4/t) and INR 400/t ($5/t), respectively, with effect from 1 October 2024, as per sources. Australian premium hard coking coal (PHCC) prices rose $18/t w-o-w to $221/t CNF Paradip. Both these prices impacted BF mills.

IFs were impacted too as PELLEX sharply increased by INR 1,100/t ($13/t) w-o-w to INR 10,200/t ($121/t) DAP Raipur on 4 October. Domestic billet prices in key locations increased by INR 1,000-2,300/t ($12-27/t). Similarly, sponge prices also increased in key locations by INR 1,300-2,300/t ($15/-27t).

Outlook

Buyers are likely to wait and watch this market as they feel prices may rise further. Many participants feel that a definitive trend may emerge only after a week. "We need another week to see whether these price hikes across longs and flats get absorbed in the market," a source informed.

On the other hand, there is an air of positivity with the festive season round the corner and weather improving in most parts of India.

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.

BigMint 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, BigMint 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.