The local Indian hot rolled coil (HRC) market has witnessed a steady fall in trading activity during the past week despite deep discounts becoming widespread, with large integrated steel mills resorting to aggressive destocking in the face of low fresh bookings by end-users, traders said on Monday, February 24.
Most large integrated steel mills have been offering INR 950/mt ($13/mt) discounts over the past two weeks. A week ago, they considered lowering their prices by INR 400/mt ($7/mt) and this week additional discounts have amounted to INR 450/mt ($6/mt). As a result, the selling prices came to INR 38,300/mt ($533/mt) ex-works.
According to traders, the steel mills’ decision to increase base prices earlier in the month has proved to be counterproductive, triggering a sharp fall in fresh bookings, particularly by re-rollers and end-users. By offering higher discounts to attract fresh bookings, the steel mills have clearly been giving higher priority to destocking inventories over increasing margins towards the close of the current fiscal year.
“Indian steel mills increased HRC base prices averaging around INR 2000/mt ($28/mt), but had not anticipated higher-than-expected resistance from large user industries. The expected uptick in demand from large government investments is also not likely in the medium term, resulting in lack of interest among buyers,” a Mumbai-based trader said.
“The demand in the last quarter of the current fiscal will also fall short of the expectations of large steel mills. Several large producers like Tata Steel and JSW Limited have been pushing back the brownfield expansion plans of their steel mills, indicating that optimism over prices has been waning in the last quarter,” he added.
At least two traders said that Indian steel mills were focusing on destocking existing inventories as they could not depend on pushing volumes overseas in view of the uncertain demand profile in key exporting markets and in China and difficulties in making delivery commitments due to disruptions in shipping lines and freight rates.
$1 = INR 71.80
