India: Mills back in export markets, to complete July shipments
After about two weeks of wait-and-watch, Indian primary mills have returned to the export market over the last week with a clutch of deals. SteelMint had reported earlier...
After about two weeks of wait-and-watch, Indian primary mills have returned to the export market over the last week with a clutch of deals.
SteelMint had reported earlier that the mills had already booked around 60% of their July shipments. It is now heard that they are active again, seeking to book the balance 40% or even more.
"The export allocation is 30 to 35% of their total production but I would not be surprised if they tweak it to 40% since domestic offtake is dull at present," informed a market source."The larger mills do not want to be caught in a situation where they see that the domestic demand has not picked up and, at the same time, they have not fulfilled their export allocations. In such a scenario they would have to sit on inventory, which is highly avoidable," he added.
If caught with high idle inventory, the pressure would mount for them to reduce prices. They would not want to do this since they had not cut production despite the second Covid wave and oxygen crisis in May.
Deals point to renewed activity
Sources indicated that although vessel availability has improved, the freight rates are still high. However, since margins are quite decent, mills don't mind booking even at elevated rates to avoid inventory pile-up. These deals indicate keenness on part of mills to complete their July shipments.
- For instance, around 25,000 t of wire rods have been booked, jointly offered by two to three mills.
- Another consignment of 40,000 t of pig iron is Turkey-bound, having been booked at around $560/tonne FoB levels.
- There were also unconfirmed reports that some Indian mills have also started offering HRCs below $1,000/t CFR Turkey for July delivery. With SE Asian markets not in a buying mode because of the increase in Covid cases, the markets open to Indian mills are Turkey and to some extent Europe, for HRCs. However, the latter is not a volumes market whereas Turkey can buy in large consignments provided its import prices are lower than domestic. Price indications for Vietnam were heard around $1,020-1,025/t CFR.
- Around 80,000-100,000 t of rebar were also on offer from two leading primary mills. Out of this, one cargo has been booked while another is still under negotiation.
- Indian mills collectively booked around 80,000 t of HRCs to the UAE at $1,030-1,050/t CFR for July-August shipments.
- An Indian state-owned mill reportedly sold 30,000 t steel blooms (150*150mm) through export tenders. According to SteelMint sources, the mill concluded the tenders at $604-606/t, FoB, on advance payment basis. The cargo readiness schedule is by end July. Steel Authority of India Ltd (SAIL) has floated an export tender for 18,900 t steel billets, 125*125mm, 4SP/5SP grade, as per latest reports. The cargo readiness schedule is likely for mid August.
Despite mills being active in exports, chances of a sharp price correction in the near term are low. "The mills may even offer discounts to larger bookings but overall a sharp correction is not expected," said a source.
Prices as on 8:50 IST, 16th June. d-o-d changes indicated against closing price of 15th June