Ex-India hot rolled coil (HRC) prices have remained largely unchanged over the past week while most sellers have kept holding back their offers amid mounting pessimism prevailing in most destinations, with China’s slump, coupled with limited export allocations for the current quarter and slightly improved local sales enabling mills to resist sudden export price adjustments.
More specifically, ex-India HRC prices have remained at $585-620/mt FOB, the same as last week. Sources said that, even though sentiments across Asia and the Gulf have taken a hit from the slide in prices in China and buyers have been unwilling to accept higher prices, Indian sellers have been in no mood to cut prices to drive sales, leading to moribund export market conditions. “If global demand remains weak including demand in China, then Indian mills will sell at $650/mt CFR in the next 10 days to the Middle East, as China offers mainly SS400 and Q195 HRC, while customers in the UAE need SAE1006 HRC and India still has September shipment, while China has only October-November,” an international trader told SteelOrbis.
“Expectations of an improvement in prices have been belied. But local mills are not even submitting offers as they can afford to ride out the current lack of activity on the export front. The local sales outlook is very promising and the next quarter looks to be a good one,” sources in Jindal Steel and Power Limited (JSPL) said.
“Profits of most steel companies have been under strain as evident from first quarter financial results. Steel companies, therefore, are not willing to be aggressive in selling overseas. Local demand and margins are focus areas now to improve company bottom-lines. Resumption of business activity in Europe after the holidays and new tariff quotas will be the next trigger of the market,” another source told SteelOrbis.
However, according to a steel sector analyst with a Mumbai-based financial advisory firm, the biggest concern for the steel sector in general are the deflationary forces in China, the second biggest economy, and its risks of contagion in the region. “Growth rates falling in China will have a demand suppression impact across most Asian countries, with prices declining accordingly. Indian steel exporters will face a strong headwind with a limited ability to match lower acceptable prices,” he said.