Indian hot dipped galvanized coil (HDG) export prices have been cut by most integrated steel mills during the past week to $520-525/mt FOB, compared to $525-535/mt FOB over the previous week, due to scarce buying interest from key markets. However, some reports in the market indicate that at least one local steel mill has been negotiating an ‘optional purchase’ memorandum of understanding (MoU) for long-term deliveries.
According to market sources, one western India steel mill is negotiating an innovative agreement for supply of HDG for long-term deliveries, starting in the second quarter of the current fiscal year at a pre-determined price range, although both buyer and seller are keeping the contours of the terms and conditions strictly confidential.
The sources said that, if finally concluded, this could set a trend for local steel mills to move to MoU-based exports at a pre-determined price, including discounts and optional volume commitments, away from negotiated spot sales. This would somewhat mitigate risks currently being faced by both buyers and sellers from Covid-19 disruptions as these sales would be for medium-term deliveries, the sources added.
Even amid the very limited deals concluded during the past week, indications are that both Asian buyers and local exporting steel mills are looking at contracts for deliveries beyond the June or second quarter, expecting some normalcy to return to trading conditions, a manager at the Central Marketing Organizations of Steel Authority of India Limited (SAIL) said.
Market sources said that a western India-based steel mill has concluded an export contract for 8,000 mt for early June delivery at $525/mt FOB and market reports suggest a further two percent discount, indicating that steel mills and key markets are looking at medium-term contracts rather than early deliveries.
The sources said that lower prices ranging around $520/mt FOB with additional discounts submitted to buyers in the Gulf region did not evoke any response as buyers were expecting a further fall in prices and given renewed uncertainties from Dubai imposing a lockdown.