Indian local hot rolled coil (HRC) prices continued to seek lower levels with trade channels sharply lowering or halting fresh bookings in view of extended slow movement of stocks and market expectations of producers adjusting prices to reverse the bearish sentiments and trade activity, SteelOrbis learned from trade and industry circles on Monday, September 27.
Tradable HRC prices were down around INR 500/mt ($7/mt) to levels of INR 64,700-65,700/mt ($877-890/mt) ex-Mumbai with limited trade volume heard at lower end of the range.
Primary producers maintained base price at INR 67,000/mt ($908/mt) ex-works and above, but discounts were reported to have widened to INR 3,000/mt ($41/mt), up from INR 2,000/mt ($27/mt) a week ago. A section of market intermediaries said that steady rise of level of discounting since early September could indicate that mills might be forced to adjust base prices to reverse the extended depressed market conditions.
“Local HRC prices have fallen for the past three consecutive weeks. There is fundamental weakness in demand. On one hand the lower domestic prices has increased the discount over landed price of imports to 17-20 percent from 10-15 percent a month ago,” a steel sector analyst with a Mumbai based financial services firm said.
“But lower price realizations will limit producers’ ability to use pricing as a tool to revive demand. Of the two key inputs, iron ore and coking coal, price of the latter has surged. Even though price of iron ore has fallen, producers are hamstrung in passing on its benefits to consumer as imported coking coal prices are increasing,” he said.
Even as market intermediaries were expecting October base price adjustments by producers, an official in government run mill said that gross margin realizations from HRC sales at current prices is already under strain from rising coking coal prices, up by around 103 percent year-on-year basis and options of lowering prices to push more volumes in the market is very limited.
$1=INR 73.80