Posted on 06 Aug 2024
India: Steel, raw material prices fall further m-o-m in Jul'24. Rains, imports play spoilsport
- Raw materials feel heat of slack finished steel demand
- Low demand, higher supplies dampen coal sentiments
- Short term may continue to see prices trending lower
Morning Brief: The downtrend in steel and raw material prices continued into July, a month which saw some deep troughs. Iron ore fines and silico manganese were the worst hit, but, overall priced performed poorly across-the-board, on the back of a sustained lack of demand amid a monsoon, show-cause on quality issues and the imports surge in flats. BigMint goes behind the scene:
Factors that impacted domestic steel, raw material prices in Jul'24
Coal
- Australian premium HCC coking coal: Average Australian premium HCC coking coal prices dipped 4% m-o-m to $260/tonne (t) CFR India in July, 2024 from $270/t in June. A temporary hike, due to an accident at Anglo American, had lifted offers but, later in the month, prices fell on demand-supply mismatch in major importing countries. Prices also fell on account of slow demand amid oversupply. Traders were under increasing pressure to lower offers amid oversupply. The weakened market even led to reselling of cargoes.
- Indexed port-side ex-Gangavaram prices of RB3 (4800 NAR) from South Africa dropped 5% to INR 7,940/t in July 2024 from INR 8,350/t in June 2024. This same grade of thermal coal, CNF Gangavaram, however, fell a sharper 7% m-o-m to $90/t in July 2024 (from $97/t in June). Prices of thermal coal remained subdued amid waning demand for finished steel from tier-2 mills who themselves use coal in steel-making and are dependent on sponge iron as a raw material. The ongoing monsoon in India has led to a decrease in thermal coal demand across regions. Industrial demand has also slowed, as infrastructure projects are on hold till the monsoon ends, which has resulted in limited coal imports.
Ferro alloys
- Silico manganese 60:14: Prices of the daily 60:14 grade silico manganese index in Raipur dropped the steepest amongst all input materials, by 16%, to INR 70,950/t in July 2024 (INR 84,880/t in June). Prices slumped due to a few reasons. One, weak demand from steel mills limited trade, leading to production cuts. Secondly, dwindling export inquiries also suppressed prices. Thirdly, as per MOIL's monthly revision, lumps below 44% Mn decreased 8% m-o-m. Lastly, global prices of the ore from South Africa, Australia and Gabon remained stable m-o-m. Overall, steel mills were cautious on procurements, expecting further price declines.
Scraps and metallics
These lost ground amid weak finished demand and lower coal prices.
- Pellet based PDRI: Pellet-based P-DRI, ex-Raipur, slipped by 4% m-o-m to INR 25,570/t in July, compared to INR 26,710/t in June.
- CDRI mix: Prices of CDRI with a mix of 70% lumps, 30% fines, FeM 80% (+/-1), ex-Rourkela skidded down 6% m-o-m in July to INR 26,300/t (INR 28,040/t in June).
Prices fell amid dull steel demand. Moreover, the drop in South African coal prices also failed to keep sponge supported. That apart, competing raw materials like scrap fell m-o-m, having a spin-off effect on sponge.
- Steel grade pig iron: Pig iron prices in July 2024 slipped 3% m-o-m to INR 37,710 (INR 38,820/t in June). Pig iron auction prices from SAIL and NMDC both saw a decline last month, although, there was a notable improvement in pig iron prices in the last week of July. Overall, due to weak finished demand, domestic pig iron prices may continue to face downward pressure.
- Domestic melting scrap (HMS 80:20 ex-Mumbai): These fell by 5% m-o-m to INR 33,270/t in July 2024 as compared to INR 35,080/t in June. Domestic scrap was down m-o-m amid dull finished steel demand. Inventories piled up at mills which forced them to adjusted production. Thus, scrap was also on the backfoot.
- Imported containerised melting scrap: Prices of imported shredded scrap in containers from Europe slipped down 2% in July to $410/t CNF Nhava Sheva ($417/t in June). India's imported ferrous scrap offers witnessed a downward trend due to reduced buyer interest, attributed to the availability of cost-effective alternatives such as domestic scrap and sponge iron. Additionally, finished steel demand continued to remain slow. However, the drop was slight at 2%, as offers from the UK and Europe remained firm amidst better realisation in the domestic market coupled with higher freight rates resulting from container shortages.
Iron ore
Iron ore lumps and pellets fell steeply amid slack steel demand.
- Fines & lumps: Fe62% fines prices from Odisha eroded by a considerable 12% in July 2024 to INR 4,540/t (INR 5,160/t in June) while the Fe63% lumps (Odisha) slipped a deeper 15% m-o-m to INR 6,220/t (INR 7,360/t). Prices fell in the first half of the month, owing to the decline in pellet and sponge prices. Moreover, bids in OMC's auction fell m-o-m. In fact, bids decreased by INR 150-400/t for majority of the fines lots, amid the drop in pellet and sponge prices. However, response in the second half of the month remained active because of tight ore availability due to dispatch issues, driven by the rainy season, at OMC and NMDC. Plus, some restocking preceded the demand rebound expected in the third (October-December) quarter.
- Pellets: The bi-weekly pellets index DAP Raipur (grade 63%), dropped 11% to INR 9,180/t (INR 10,310/t). Prices hit a one-year low because of a decline in export prices and diversion of supplies from eastern India to the domestic market creating a supply glut. That apart, most sponge-makers receded to the sidelines, waiting for pellet prices to fall further and also for OMC's auctions, to get price clarity. In any case, demand from the sponge-makers was subdued on the back of slack steel demand.
Steel
This segment, comprising billets and finished products, saw prices fall as demand remained slack across-the-board.
- Billets: The ex-Raipur billet index dropped to a four-month low and by 7% m-o-m to INR 39,370/t in July 2024 (INR 42,550/t in June).
- Rebar & wire rods: The ex-Mumbai BF-grade rebar lost 7% m-o-m to INR 53,380/t (INR 57,380/t in June) in the period under review. The IF grade dropped 8% to INR 46,710/t (INR 50,510/t) while wire rods (ex-Durgapur) showed a 6% decline to INR 43,030/t (INR 46,020/t) last month.
BF longs were impacted by weaker construction activities with the onset of the rainy season and a slide in IF rebar prices. IF mills suffered major inventory pile-ups which dragged down prices to three-year lows. Plus, quality issues also impacted IF rebar sales to NHAI contractors.
- HRC: Ex-Mumbai trade-level HRC prices lost 3% m-o-m at INR 52,270/t (INR 53,840/t) amid weak domestic and export demand and a surge in cheap imports from Vietnam and China.
Source:BigMint
