Indian domestic steel production will gradually increase with the easing of lockdown restrictions taken together with the absence of a corresponding increase in demand, resulting in declines in prices and in gross spreads per ton (realizations per ton of steel minus raw material costs per ton of steel) for both hot rolled coil (HRC) and rebar, according to a report by India Ratings and Research (Ind-Ra).
According to the report, by mid-June this year rebar spreads underwent a greater correction than HRC spreads due to the sharper fall in demand than in supply because of the presence of several small and medium-sized players and the fragmented nature of industry in the long product segment leading to intense competition.
However, rebar spreads are likely to be less impacted in the near term up until the end of the current fiscal year compared to HRC due to a likely better demand pickup leading to a price increase backed by the expected implementation of government spending on infrastructure.
HRC and rebar prices were down three percent and four percent month on-month in June this year, respectively.
The increase in China’s imports benefited Indian domestic steel players, especially large steel producers who were operational at lower utilization levels during the lockdown and exports to China compensated for dull domestic demand though margins were lower than for domestic sales.
