Indian integrated steel mills have increased their local hot rolled coil (HRC) prices for the second consecutive week, to offset the increase in the variable cost of production and amid some improvement in demand, sources told SteelOrbis on Monday, July 13.
Most large HRC producers have hiked base prices for the second time for July deliveries, by INR 500/mt ($7/mt) to INR 38,800/mt ($517/mt) ex-works.
Traders said that steel mills are banking on the noticeable demand rise, particularly in rural sectors, and almost zero imports for the past several weeks, to enable the market to absorb the rapid increase in base prices over the past fortnight.
According to an official at Tata Steel, inventories both at steel mills and consumers are high but have been declining since late last month largely based on off-take linked to the rural economy.
The official said that close to 20 percent of Tata Steel’s total sales are linked to rural economy projects and consumers, and the revival of demand is expected to provide support for producers’ attempts to increase base prices, which are also imperative as higher mill utilization rates entail a higher variable cost of inputs.
According to a steel sector analyst at a Mumbai-based financial advisory firm, local steel mills are being cautious about increasing base prices and are doing so in smaller incremental doses than usual. This is because producers are still unsure of whether higher prices will be absorbed in the market owing to ‘uneven demand improvements across regional markets’.
The analyst said that price increases are being matched with offers of easier trade terms, including extending softer credit terms to large dealers and C&F agents, which has led to a slight revival of fresh bookings by market intermediaries.
$1 = INR 75.00
