Sluggish demand in Anthracite coal market continues to persist in India.
However, domestic market prices were assessed higher in some markets due to slight improvement in buying.
A trader in east India said that buying started to gain momentum after a long sluggish period and prices thus went up by around INR 300/MT. He further quoted prices to stand at INR 6,300/MT. On Monday last week, prices were around INR 6,000/MT in the market amidst persistence of subdued demand.
Import offers went up slightly to around USD 90/MT, CFR India. The slight increment in offers is due to supply tightness, according to a market participant.
SteelMint research shows that 33,300 MT of Anthracite coal was imported in last week (22-28 Nov’15). The import was higher than imports in the entire month of Oct’15 at 8,500 MT, which was the lowest in the 1st seven months of FY16.
Besides, the customs exchange rate for imports has remained at INR 66.70 per USD. And, INR is valued today at 66.63 per USD.
After HRC, SAIL along with other steel majors, JSW and Essar Steel seeks safeguard duty on other steel products.
Steel Authority of India Limited (SAIL) in its recent conference call with investors on Indian steel industry and company performance in Q2 FY16 mentioned that company is hopeful that safeguard duty on other steel products may be imposed soon.
SAIL mentioned that the domestic steel industry demand grew by 4.1% Y-o-Y basis in Q2 whereas global steel prices have reduced by 46% over the last 18 months. India’s exports declined by 71% Y-o-Y basis and net sales realizations (NSR) of steel products declined by 21% Y-o-Y in Q2 FY16.
The safeguard duty which was announced in Sep’15 has not helped much in controlling price fall in domestic market as global HRC prices have fallen by USD 100/MT since safeguard duty inquiry was started. Thus SAIL has made a request to DGFT to impose minimum floor price (MFP) for imported steel. MFP is a minimum price beyond which steel cannot be imported to India from any country.
The company as a part of industry has also applied for safeguard duty on plates, wire rod and HR sheets due to increased imports of these products in Indian market. Company expects DG safeguards to complete their study by first week of Dec 2015.
Fall in Finished Steel Inventories, Rise in Semi Finished Inventories
Although finished steel inventory of SAIL declined by 55,000 tonne during quarter to 1.5 MnT, its semi-finished inventory increased by 7,00,000 MnT to 1.6 MnT during the same period. This is because shutdown in SAIL’s Bokaro plant which was planned for 45 days was prolonged to 75 days resulting in production loss of INR 55 crore.
Due to this influx of flat steel products (by SAIL) is likely in Indian market in coming months which is again going to pressurize the prices and inventory levels in domestic market.
Global iron ore prices have been witnessed a continuous downfall since Oct’15. On 30 Nov’15, iron ore prices for Fe 62% fines touched to a level of USD 42.8/MT, CFR China.
Prices have already touched below to a level of 10-year low and still heading towards further downfall. Globally, iron ore prices have tumbled down by 35% since the beginning of the year because of China’s slow economy growth and dull construction activities in the country. Oversupply from major miners is on the track to increase, which is a major reason behind price downfall.
Ginehart’s Roy Hill project, which was supposed to pump 55 MnT iron ore in the market, is all set to load its first shipment (cape size vessel) from the mine within this week. However, market analysts anticipate the upcoming shipments from Roy Hill will pressurize iron ore prices, although the producer says 90% of its output will be for long term agreements and it won’t pressurize prices.
Chinese steel mills are not restocking iron ore as they are facing deeper losses from continuous decline in global iron ore prices as well as suffering from extreme tightness in liquidity.
Iron ore inventories in China have increased as compared to last month. On 27 Nov’15, inventory at major Chinese ports was recorded at 90.0 MnT, which was highest since May’15.
Falling steel demand in China has forced mills to cut output, but mills haven’t cut output quickly enough; in turn dampening steel prices.
Prices of spot billet, a semi finish product, have slumped to around RMB 1,500/MT. Sharp fall in billet prices has worried small steel mills, which may forced to shutdown permanently.
It was learnt through sources that Odisha based merchant miners may reduce fines prices by INR 100-300/MT probably by the end of this week. However no confirmation has been received from the company officials.
Amid declining prices of semi finished and finished steel products, iron ore prices in domestic as well as global market have fallen sharply.
On one hand global iron ore prices have hit record lows and have touched USD 42.8/MT, CFR China (for Fe 62% fines) as assessed on 30 Nov’15 over increasing iron ore supplies from world’s major miners namely Vale, Rio Tinto and BHP Billiton.
Weak Chinese steel demand continues to keep iron ore procurement by Chinese steel mills low which has led to accumulation of iron ore stock at Chinese ports. Global iron ore fines prices have fallen by USD 6/MT.
In domestic market, iron ore prices have also fallen significantly. Fines prices in Odisha have declined by INR 150-200/MT M-o-M in contrary to lump prices which have declined by INR 250-450/MT.
SteelMint learnt that steel production from blast furnace has not witnessed any significant change in the past few months. India’s steel production through blast furnace route has remained at 28.74 MnT in H1 FY16 (Apr’15-Sept’15). The figure was 27.88 MnT in H1 FY15 (Apr’14-Sept’14). Thus it seems that major industry players have not made any significant reduction in their steel production in this fiscal.
Odisha based merchant miner-Kalinga Mining Corporation (KMC) has also slashed iron ore prices. The miner has cut lump prices by INR 400/MT and fines prices by INR 50/MT.
The miner had last revised prices in the mid of Nov’15. Weak buying from sponge iron manufacturers continue to pressurize iron ore prices.
KMC iron ore prices
|Grade (Fe %)
||Prices in INR/MT
Ex-mines prices in INR/MT & inclusive of Royalty
Source: SteelMint Research
Today, Serajuddin mines has also revised its prices whereby the miner has lowered lump prices by INR 150/MT. Current offers are as follows- 5-18 mm (Fe 63)-INR 2,150/MT and fines (Fe 63): INR 1,450/MT (prices mentioned are ex-mines & inclusive of Royalty).
Serajuddin Mines has reduced lump prices by INR 150/MT and kept fines prices unchanged as of now.
Odisha based merchant miner, Serajuddin Mines has reduced lump prices by INR 150/MT however fines prices continue to remain unchanged for now.
”Iron ore lump bookings have fallen sharply in the past days which has led to price cut in lump. However, fines prices continue to remain same as of now”, shared a company official.
Serajuddin Mines Iron Ore Prices w.e.f 01 Dec’15
|Grade (Fe %)
Ex-mines prices in INR/MT including Royalty
1 USD=66.8 INR
Source: SteelMint Research
The miner has cut lump (5-18 mm) prices by INR 750/MT since beginning of Oct’15. While, fines prices of Serajuddin mines have reduced by INR 150/MT in the same time frame.
Following price cut of Serajuddin Mines other merchant miners in Odisha are also likely to cut iron ore prices. Market participants highlighted that owing to sluggish demand in semi finished and finished products, both lump and fines prices are expected to witness reduction in this week.
Chinese rebar export offers remained stable at USD 260/MT. While, offers in Turkey fell by USD 13/MT in a week’s time.
Chinese rebar export offers remain unchanged in consecutively second week at USD 260/MT, FoB main port. Offers fell by USD 2/MT in Nov’15, and USD 5/MT in Oct’15.
Similarly, imported rebar offers in UAE remain unchanged in last one week and stood at USD 353/MT, CFR Jebei Ali.
On the flip side, Turkey export rebar offers down by USD 13/MT as demand seems to be weak from Middle East countries. Offers stood at USD 348/MT, FoB main port.
INR weak against USD
Indian Rupee is under pressure and depreciated by 19 paise to INR 66.76 against USD in yesterday’s trade. On 1 Nov’14, Rupee was trading at around INR 65.40 per USD, which depreciate by 2% since then. The currency has depreciated to the lowest level in last 2 years.
Global rebar offers in week 48 (23-29 Nov’15)
||Offers in USD/MT
|China export FoB main port
|CIS export FoB Black Sea
|Turkey export FoB main port
|UAE import CFR Jebel Ali
|India (ex-works Mumbai)
USD 1 = INR 66.81
Source: SteelMint Research
Bulk shipping freight rates have continued to exhibit a stable trend this week.
The stability has been a result of absence in active demand in the commodity trading market. During the week, freight rates of all classes of vessel are assessed within the range of USD 6-11.50/MT.
Availability of excess vessels and intense competition among shipping companies have prevented upswing in freight rates. Moreover, slowdown in major global economies has been contributing decisively towards lackluster freight market.
Crude oil prices continued to remain low, ruling out any influence on shipping freight rates. On 26 Nov’15, crude oil prices were reported at USD 39.65/barrel.
Viewing at prevailing demand scenario, there is no prospect of any increment in freight rates in the next week.
Current freight rates
Freight rates from South Africa to India are assessed at USD 7-10.50/MT.
1.Supramax: USD 9.50-10.50/MT
2.Panamax: USD 7.50-8.50/MT
3.Capesize: USD 7-8/MT
Freight rates from Indonesia to India have hovered within USD 5-7/MT.
1.Supramax: USD 6-7/MT
Freight rates from Australia to India are assessed at USD 8-10.50/MT.
1.Supramax: USD 10.50-11.50/MT
2.Panamax: USD 8-9/MT
3.Capesize: USD 8-9/MT
Monthly crude oil prices with vessel freight
||Crude Oil Prices
||Vessel Freight, Australia to India
Panamax vessel prices in USD/MT
Oil prices in USD/barrel
Source: OPEC, Coalspot
No improvement has been reported in week 48 as semi finish makers remained under pressure and reduced prices sharply by INR 500-1,000/MT W-o-W. Sponge iron prices at pan India declined by INR 450-700/MT this week. While, billet market remained stable across India, except in north and east India as prices in these regions fell steeply by INR 750-1,050/MT W-o-W.
In addition, NINL reduced prices this week by INR 700/MT and other Pig iron makers followed suit and reduced prices by INR 200-500/MT.
Week 48 key points
1. 78-80 FeM sponge iron prices assessed in Durgapur at INR 11,400/MT (-700), Rourkela at INR 10,800/MT (-550), Raipur at INR 12,450/MT (-450) and Bellary INR 12,150/MT (-450).
2. P-DRI prices across major markets hovered in the range of INR 10,400-12,700/MT.
3. Billet price in Durgapur at INR 19,000/MT (-1,050), Rourkela at INR 18,450/MT (-750), Raipur at INR 19,500/MT (-250), Mumbai at INR 21,600/MT (-100), Chennai at INR 20,000/MT (-250) and Hyderabad at INR 21,500/MT (-100).
4. NMDC reduced iron ore lump prices by INR 300-360/MT and ROM by INR 260/MT owing to reduced dispatches, but kept fines prices unaltered.
5. Pellet prices fell by upto INR 350/MT with major drop in east India.
6. Imported scrap offers remained firm in global market. Shredded scrap offers were assessed within USD 205-210/MT, CFR India.
Week 49 outlook
1. Pressure is likely to remain on semis manufactures amid lull trade activities.
2. Following NMDC’s price cut, other Odisha based miners may reduce lump offers in near term.
3. Western India pellet prices may decline owing to cheaper imported lump offers.
4. Stability is likely to prevail in imported scrap market amidst pre-winter stocking by buyers due to Christmas eve and winter season.
Spot iron lump premium witnessed a gradual decrease this week and was assessed at USD 0.05/ dry MT unit.
Week 48 noticed a slight fall of 12% W-o-W in spot lump premium. This week spot lump premium for Fe 62% was assessed at USD 0.05/dry MT unit against last week when it was seen at USD 0.057/dry MT unit.
Falling lump premium have turned imported lump cargoes to China further cheaper. Imported lump cargoes are still a preference over imported pellet cargoes. Also ample availability of lump cargoes in China is also another reason for its preference over pellets. China has imported 119 MnT lump in the time span of Jan’15-Sept’15.
Chinese steel prices have hit record lows which have resulted in mills closure. Battling with softening steel prices and negative margins many mills are showing interest in buying medium grade cargoes.
Apart from this, mills have resisted themselves from booking larger capesize vessels from seaborne market because by the time the shipment would arrive, spot iron ore prices would have fallen further. Thus, medium sized mills are preferring to buy smaller parcels from available port stock.
Spot pellet premium fell by 36% in Nov’15
Pellet premium contiued to drop this month. Spot pellet premium has fallen sharply by 36% since beginning of Oct’15.
Spot pellet premium was last seen at USD 12.25/dry MT , CFR China (as on 18 Nov’15) against USD 19.25/dry MT, CFR China in beginning of Oct’15.