Indian domestic hot rolled coil (HRC) prices have been maintained within the higher range of INR 37,500-38,500/mt ($613-628/mt) ex-works during the past week, but discounts of about INR 500/mt ($8/mt) are still valid in most markets to keep volumes moving in a subdued market, traders said on Tuesday, August 13.
"Contrary to expectations, steel mills have not rolled back the price hikes effected earlier in the month, nor have discounts been on offer from primary producers. Hence, traders are offering discounts to push volumes in the market, risking their trading margins," a Mumbai-based trader said.
"There is no confidence in the manufacturing sector and volume transactions in the HRC market are very weak with little prospect of a revival," the trader said, citing the 2.2 percent contraction in Indian industrial output in June this year, the second straight month-on-month drop.
The trader said that the market is caught in a double bind of rising costs of raw materials for steel mills which are passed on to costs of finished steel, whereas the market is resisting the higher prices because of steadily falling demand.
"Most intermediaries are unsure of the market direction. But one thing is clear,i.e., in the medium term either HRC prices have to correct downwards factoring in low demand or market players will have to suffer a crippling inventory build-up," he said.
Although there has been no announcement of a HRC price rollback as expected by the market, sources said that a reduction of INR 1,000/mt ($16/mt) is a distinct possibility later in the month since Steel Authority of India Limited (SAIL) has announced that it is keeping a a close watch on price movements and will soon adjust its own price accordingly.