Posted on 20 Aug 2024
Morning Brief: The BigMint India Steel Composite Index fell again to 133.0 points, down by 0.7% for the week ending 16 August, 2024. It may be noted here that 133 levels were last seen way back in February, 2021. Naturally, this has jolted the overall market sentiments, raising further concerns about a possible "turnaround" anytime soon.
On top of that, the index continued to hover at more than three-and-a-half-year lows. This situation has brought back "bitter memories" of Covid-19 levels of late 2020-early 2021 when the index was stuck at similar levels. On the other hand, both the sub-indices, including flats and longs, inched down by -1.1% and -0.3%, respectively.
Factors that influenced last week's index
A sustained dull domestic demand trend, lack of export opportunities amid a tardy global consumption trend, monsoon rains are all colluding to keep prices on a tight leash.
BF rebar prices decline w-o-w: Trade-level blast furnace (BF) rebar prices declined w-o-w due to weak buying interest across markets, marking the tenth consecutive week of falling prices. Currently, rebar prices (12-32mm, Fe500D, and Fe550D) in the trade segment have dropped by INR 400/t ($5/t) to INR 49,900/t ($594/t) exy-Mumbai, excluding 18% GST. In the projects segment, prices are now ranging between INR 48,000-49,000/t ($572-584/t) FOB Mumbai. Market activity remained subdued due to the ongoing price decline and a gap between bids and offers.
IF-rebar prices range-bound w-o-w on need-based buying: IF-rebar trade prices remained range-bound w-o-w, driven by need-based buying across markets. Buyers exercised caution amid market volatility, avoiding bulk purchases, which prompted sellers to offer attractive discounts to clear inventories. Moreover, in response to weak market sentiment and higher inventory levels, mills adjusted their production. Inventory levels for IF-rebars ranged from 12 to 15 days across markets. As of 16 August, trade-level IF-rebar prices edged up by INR 100/t ($1/t) to INR 45,100/t ($537/t) ex-works Mumbai. The monthly average price gap between BF and IF rebars stood at INR 5,000-5,500/t ($60-65/t) ex-Mumbai. IF-rebars account for 65-70% of the market share.
Domestic flat steel prices fall on dull demand: Just like longs, flats too continued to face similar adversities of prolonged dull demand. Current prices of HRCs (2.5-8mm, IS2062, Gr E250 Br) ex-Mumbai declined by INR 100/t to INR 50,300/t. Similarly, prices of CRCs (0.9mm, IS513 CR1) ex-Mumbai dipped by INR 100/t to INR 57,400/t. All prices exclude 18% GST.
Anti-dumping concerns hit exports: The export market also failed to generate any confidence among traders amid anti-dumping concerns in the global market. In this context, Indian steel mills have continued to withhold their HRC export offers to Southeast Asia and the Middle East (ME) due to the global trend towards protectionism and anti-dumping measures. The European Union (EU) and Vietnam have launched anti-dumping investigations into HRC imports from several key countries, including India, creating significant obstacles for Indian steel exports. Thus, domestic prices remained unsupported. Offers to the Middle East and Vietnam are on hold since May this year. China is ruling these two markets with aggressively low offers. Last week, China's offers to the Middle East fell by $5-10/t w-o-w to $525-535/t CFR UAE against $535-540/t CFR UAE in the previous week. Chinese HRC (SAE1006) export offers to Vietnam decreased by $5/t to $500-510/t CFR HCMC against $505-515/t CFR last week.
Outlook
The current conditions are expected to persist in the short-term, as market fundamentals are unlikely to change soon, particularly due to China's aggressive export strategies and of course the anti-dumping concerns in the global market which have hampered Indian steel mills'aspirations. However, some clarity on demand and prices may emerge with the start of the third quarter (October-December), by which time the monsoon is also expected to have receded.
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.
Source:BigMint
