After a brief week-long stability, local Indian cold rolled coil (CRC) prices have resumed their downward trend, slumping by INR 1,500/mt week on week to INR 40,000/mt ($560/mt) ex-works, as the crisis in the auto sector has deepened during the past week, triggering a further fall in trading volumes and higher discounting by market intermediaries, traders said on Monday, August 19.
“Reports of more automobile manufacturers resorting to production cuts and stoppages at production lines have worsened the market sentiments and caused apprehensions that even small-volume bookings by end-users will come to a halt,” a Mumbai-based trader said.
During the past week, more auto companies announced drastic measures to cope with steadily falling sales which have already hit a 19-year low, triggering apprehensions that raw material off-take from this sector will worsen further, which in turn would fuel already-high inventories at steel mills.
Furthermore, traders are already carrying inventories built up at higher prices and are facing a working capital crisis with large credit locked up in unsold or slowly moving stocks, traders said.
Auto companies joining the list announcing measures to fight the downturn during the past week were Hyundai Motors India Limited which declared “no production days” during August.
Passenger and commercial vehicle major, Mahindra & Mahindra, has announced that it is laying off 1,500 contract workers, while passenger car manufacturer Toyota Kirloskar India Limited’s capacity utilization at one of its plant has been reduced to 50 percent.
Market sources said that, with no revival in market conditions expected even in the medium term caused by deep structural factors behind the slowdown, a larger number of traders across the western and northern regional markets, which are hubs of large auto manufacturers, are reportedly offering discounts as high as INR 1,000/mt ($14/mt) to manage high-cost inventories, but without much success in the absence of any buying interest from any of their key end-users.
$1 = INR 71.37