Local Indian hot rolled coil (HRC) prices have seen a significant correction during the past week, moving down by around INR 1,000/mt ($16/mt) to INR 34,500/mt ($549/mt) ex-works, as dealers have rushed to liquidate stocks in anticipation of strong inflows of imports, traders said on Monday, March 16.
According to a Mumbai-based trader, a near panic has settled into the market, while there have been no signals from local steel mills regarding adjustments of their domestic HRC prices.
"At the same time, a feeling has been gaining ground in the market that the government has failed to do enough to protect domestic production from import competition," the trader added.
Market sources point out that in the federal budget presented last month the Indian government had incorporated an enabling provision to increase peak import duty to 15 percent, but kept the effective rate at 10 percent.
The current rate of 10 percent will not be effective in restricting HRC imports into the country since exporters in China and South Korea are very aggressive in reducing their offers steadily in order to keep pushing volumes into the market, the sources said.
In fact, with local steel mills deferring any price adjustments, exporters have been emboldened to push shipments at aggressive offers, prompting local dealers to hasten up their stock liquidation to avoid getting saddled with high-priced inventories, the sources added.
Fear of oversupply in the domestic market also puts pressure on HRC prices since exports by local steel mills are falling, owing to local mills' limited ability to reduce offer levels, the sources said.
Indian steel mills have been able to reduce their HRC export offers by just $5/mt during the past week to around $415-420/mt FOB for April shipments, but buyers are seeking far bigger cuts in offers before concluding transactions.
Under these circumstances, downward pressure on local HRC prices is expected to increase further as exportable volumes get channeled into the local market, the sources added.
$1=62.88 INR