Local Indian hot rolled coil (HRC) prices have remained unchanged during the past week after the base price cuts announced by integrated steel mills earlier in the month, but stray reports of discounting returning to the market indicate that the pent-up demand post-lockdown last year may have run its course, SteelOrbis has learned from trade and industry circles on Monday, March 15.
The sources said that the pent-up demand that had spurred prices for the past ten months was running out of steam and that end-user industries are now more cautious as regards restocking raw materials and steel mills have been seen to be refocusing on shipping volumes overseas to de-risk inventory build-ups.
According to government data released last week, India’s Index of Industrial Production (IIP) slipped back to a decline of 1.6 percent in January this year on year-on-year basis after three consecutive months of positive growth, indicating that pent-up demand was waning and that the overall manufacturing sector was returning to a de-growth phase again, impacting sentiments.
Sources said that, while HRC base prices have been maintained in the range of INR 53,500-55,000/mt ($736-757/mt) ex-works, discounts of up to INR 1,000/mt ($14/mt) have emerged for ex-Mumbai bookings, bringing the tradable level to about INR 53,500/mt ($736/mt) ex-works on average. Last week, base prices were lowered by mills by INR 1,000/mt ($14/mt), and demand did not improve visibly after that, indicating negative sentiments impacting trading conditions.
“The downside risks to current HRC prices can be significant,” a steel sector analyst with a Mumbai-based financial services company said. “Flat steel prices were corrected by about 3-5 percent in February. But it is still 40 percent higher on year-on-year basis. This gives rise to the possibility that the correction still has some distance to go before a new bottom is reached. The timing will depend on how deep the current decline in the manufacturing industries is,” he added.
$1 = INR 72.70
