Posted on 20 Aug 2024
Morning Brief: The "down syndrome" continues. The BigMint India Steel Composite Index fell further to 134 points, a drop of 1.1% for the week ended 9 August, 2024. The index is now hovering at more than three-and-a-half year lows and in the vicinity of the Covid-19 levels of late 2020-early 2021.
Both the sub-indices fell further w-o-w, longs by a steeper 1.50% and flats, a shallower 0.73%.
Factors that impacted the index last week
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 mills reduce prices, trade segment follows cue: Indian tier-1 mills reduced rebar list prices by INR 2,500-3,000/t ($30-36/t) m-o-m for early-August 2024 sales. On cue, trade-level blast furnace (BF) rebar prices fell w-o-w by INR 500-1,200/t ($6-14/t) across markets. Prices were weighed down by the continued subdued demand in the domestic market.
Last week's rebar prices (12-32mm) in the trade segment dropped by INR 500/t ($6/t) w-o-w to INR 50,300/t ($599/t) exy-Mumbai. Prices are exclusive of GST at 18%.
In the projects segment, prices were hovering at one-year lows of around INR 48,000-49,000/t ($572-584/t) FOR Mumbai. Buyers continued to remain on the side-lines amid the unremitting fall in prices and weak market sentiments. Procurements were only need-based.
IF rebar falls further as demand continues to remain dull: India's induction furnace (IF)-route finished long steel prices also edged lower w-o-w amid sluggish market sentiments. Procurements continued to remain dull throughout the week as buyers entered wait-and-watch mode in anticipation of further price clarity. Also, heavy rainfall throughout the country has slowed down construction activities, adding to steel market woes. Mills across regions have resorted to production cuts owing to rising inventory levels. The need-based procurement trend is expected to continue in the near-term. W-o-w, prices fell by INR 200-1,300/t ($2-15/t) across regions. Ex-Mumbai prices fell by a further INR 200/t ($2/t) to INR 44,600/t ($531/t) from INR 44,800/t ($534/t) in the previous week.
Flats struggle against imports, supply glut: As with longs, flats too continued to face similar challenges of prolonged dull demand. As a result, hot rolled (HR) and cold rolled (CR) coil producers were forced to reduce list prices by INR 1,000-2,000/t ($12-24/t) w.e.f August. Current list prices of benchmark HRCs stand at INR 51,500-52,500/t ($613-625/t) ex-Mumbai, while CRCs hover at INR 57,000-58,500/t ($679-697/t), minus 18% GST.
Two factors are pressuring down prices. One is the imports inroad, which is impacting the domestic steel industry. Over January-June, 2024, imports touched almost 4 mnt, up 48% y-o-y from 2.70 mnt in the same period in 2023. Import volumes rose by approximately 5% m-o-m in July and around over 10% m-o-m in June this year.
Two, domestically, the situation is compounded by an influx of additional supplies from major Indian steel producers like JSPL and NMDC, further aggravating the supply-demand imbalance.
Exports continue to be a no-show: Exports continued to be a no-show and failed to offer support to domestic prices. 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, though China's offers to the Middle East remained stable at $535-540/t, but those to Vietnam fell further by $10/t to $505-515/t. Such levels are just not viable for Indian mills. The EU market is quite unresponsive with stable domestic prices, sluggish demand and need-based summer restocking.
Outlook
The present circumstances are expected to continue in the short term since market fundamentals are not likely to alter soon - especially the impact of China's aggressive exports onslaught. Some amount of clarity on demand and prices may emerge with the onset of the third quarter (October-December) by when the monsoon would also 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
