Divergent trends and expectations have emerged in the local Indian hot rolled coil (HRC) market over the past week, with leading integrated steel mills reportedly planning a base price hike next month even despite the fact that tradable prices have continued to seek lower levels amid discounted sales and rising anxiety over regional lockdowns being announced in the wake of the second wave of the pandemic, SteelOrbis has learned from trade and industry sources on Monday, March 29.
Sources said that integrated steel mills are preparing for a base price increase of INR 2,000-3,000/mt ($28-41/mt) in April, riding on the back of lower export offers for ex-China material and increasing prices across key international markets.
The sources said that, while imports from free trade agreement regions have remained stable, any new import competition and resultant pressures on local prices have been largely dissipated by the low number of offers coming for ex-China HRC, and Indian steel mills will leverage the trend to increase prices.
However, according to several market participants including the two largest Mumbai-based trading firms, there are worries over increasing prices at a time when a number of regional authorities in Maharashtra in the west are imposing fresh lockdowns to check the second wave of the pandemic, while its impact on key manufacturing hubs and supply chains is yet to be felt.
Also, inherent weak trading conditions have been reflected in continued discounted sales even for low volumes in the market. The tradable price is down to INR 50,000-51,000/mt ($690-703/mt) ex-Mumbai, compared to INR 52,000-53,500/mt ($717-738/mt) a week ago. Base prices of integrated steel mills have been maintained at INR 53,500-55,000/mt ($738-759/mt) ex-works.
“The Indian local HRC price is at a discount of 7-10 percent over the landed price of ex-China material. With the export tax rebate expected to be slashed drastically in China and the discount over the landed price of imports to widen further, it gives local producers significant headroom to increase domestic prices,” an official at a government-run integrated steel mill said.
However, expressing a note of caution, a steel sector analyst with a Mumbai-based financial advisory firm said, “Clearly, producers are targeting achieving a historical high HRC price of INR 57,000/mt ($786/mt) ex-works in the near term. But there are two extraneous factors that have not been factored in by the market. Firstly, how the regional lockdowns being seen now pan out in over the next few weeks as pandemic cases rise again exponentially. Secondly, the government reaction to further price increases as it has already flayed steel companies for unreasonable hikes and ongoing investigations by the Competition Commission of India (CCI) into alleged cartelization by producers.”
$1 = INR 72.50