Ex-India hot rolled coil (HRC) prices have been kept mainly stable over the past week, but most large mills have paused the submission of offers as the absence of guidance on freight and insurance costs has complicated the drawing up of sales contracts and has increased the risks to receipt of payments, against the backdrop of the war in the Middle East.
Sources said that, while ex-India HRC indicative prices have remined stable at $490-500/mt FOB for the Middle East, no mills are reported to have submitted offers over the past weeks. Market sources said that, although freight rates have spiked, several shippers have not been providing clear guidance on freight and insurance costs, making it difficult to conclude contracts on a CIF (cost, insurance and freight) basis.
There has already been talk that freight rates will shoot up by 300 percent from India’s west coast to Middle Eastern destinations. Insurance costs vary widely from shipper to shipper. There is no basis on which sales contracts can be drawn up by an exporter. Market insiders have also noted that exporters face additional risks in receiving payments if deliveries of ocean shipments are delayed. In such cases, delays in payment may prevent exporters from obtaining interest subvention benefits, while banks may also impose penal interest rates. In particular, exporters have requested an official government advisory recognizing the current disruption as a force majeure-type event, which would help prevent contractual penalties.
In the meantime, while indicative offers in Europe have remained at around $620-625/mt CFR or around $570/mt FOB, the same as last week, demand in the region remains on the softer side and is still very price-sensitive. “Some buyers are not willing to agree to the alternate route via the Cape of Good Hope, that adds 15-20 days additional transit time apart from resultant higher freight costs,” an affiliate of Tata Steel Limited told SteelOrbis.
Furthermore, offers for ex-India SAE1006/SS400 HRC in Vietnam have been heard at $500-505/mt CFR, up by $5-10/mt week on week.
Thus, the SteelOrbis reference price for ex-India HRC has settled at $480-570/mt FOB, up by $5/mt on the lower end of the range week on week. The lower end corresponds to occasional offers heard in Vietnam, though, amid the current uncertainty regarding freight rates, this reference price largely reflects an indicative level.
“A prolonged war in the Middle East can lead to trade diversion toward Southeast Asia. Hence, shifting sales focus to newer markets in the region will have its own challenges - competition and surplus volumes on offer,” a market insider said.
