India: Domestic HRC prices fall further on muted demand

Indian HRC trade prices declined further by INR 1,000/t this week due to limited buying activities and slow demand in the domestic HRC trade market. “Delayed purchases by consumers on hopes of further decline in prices have resulted in sluggish demand,” said a source.

Domestic HRC trade prices continue to fall due to following reasons:

1.SteelMint HRC export index drops marginally- Indian mills remained active this week in exploring HRC export opportunities to the UAE and Turkey. However, bids from Vietnam remained limited as buyers there preferred domestic HRCs over imported. SteelMint’s Indian HRC (SAE 1006) export index stands at $990/tonne (t) FoB east-coast, down by $5/t against $995/t FoB w-o-w in recent deals concluded to the UAE at $1,030-1,040/t CFR basis. Meanwhile, Chinese export offers started falling on volatile futures.

2. Indian mills may lower HRC export offers to Europe- Indian mills may need to bring down prices for European buyers to make their exports viable and match competition. “At current prices of $950-960/t FoB India, European buyers may not be interested after paying 25% duty,” a source informed SteelMint. Some small bookings may take place but Indian mills may have to bring down prices to make these viable for European buyers and match competition, the source said.

3.Price gap widens by INR 4,000/t- This week, SteelMint’s benchmark prices for 2.5mm hot-rolled coils (HRCs) dropped further by INR 66,000-67,000/t (exy-Mumbai) against last week. On the other hand, major steelmakers are offering HRCs at INR 70,000-70,500/t (exy-Mumbai).

The prices mentioned do not include GST @18%. Thus, the gap between the offer and actual price is INR 4,000/t which was around INR 2,500-3,000/t last week. Normally, trade and mill prices are at par, or trade prices are higher by INR 1,000/t over mill prices.

 4. Limited demand in the domestic market- Consumers are hesitant to procure the material due to cost escalation of end-products amid higher input cost (steel products). Meanwhile traders are reluctant to purchase at higher prices since they are anticipating price correction in the near term. Also mills may provide support in the form of rebates and discounts to push up buying.

 Near-term outlook –Domestic HRC prices are expected to correct in the near term due to the arrival of the monsoon season and sluggish demand among buyers. Also, mills may provide rebates to escalate buying. Meanwhile, we foresee that HRC export premium will also be reduced since overseas buyers are reluctant to book at higher prices. This factor may lead to a bearish trend in the domestic market.


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