Trading activity in the local Indian hot rolled coil (HRC) market has taken a significant hit during the past week from mounting resistance from buyers to high prices, prompting at least a few integrated steel mills to roll back base price hikes effected close on the heels of the government lowering import duties, sources told SteelOrbis on Monday, February 8.
The sources said that large-volume end-users are already assessing import options and had reduced fresh bookings, and some integrated steel mills decided to lower base prices which they had increased by INR 1,000-1,500/mt ($14-21/mt) earlier this month after the government reduced customs duty to a unified rate of 7.5 percent from the range of 10-12.5 percent.
A few producers reduced prices by removing the price increase announced earlier, taking the effective base price to INR 52,500-53,500/mt ($719-733/mt) ex-works from the prevıous level at INR 53,500-55,000/mt ($733-753/mt) ex-works, to cope with buyers’ opposition to high prices and their retreat from the market.
According to traders and a steel sector analyst, a number of end-users are already drawing up import plans factoring in the contingency that import deliveries could only be received with a delay of two to three months, while local buyers are contending that Indian HRC prices will be corrected by at least 10 percent in reaction to the cheaper inflow of ex-China HRC.
The analyst citing preliminary calculations said that the landed price of ex-China HRC is lower than the domestic price by at least 10 percent at the current lower import duty rate, and it can be forecast that Indian prices have the potential to match a 10 percent downward correction once imports start to arrive at ports.
He said that, while imports from Japan and South Korea will not see much upside as such imports are already at a nil rate of duty, the softening of ex-China HRC prices is expected to offer higher volume import competition to domestic producers, and hence the latter taking a pre-emptive move to roll back base prices increased in a rush, contrary to the government’s reduction in the customs duty rate.
$1 = INR 73.00
