Within just two days of the Indian national budget lowering customs tariffs, domestic steel mills have hiked hot rolled coil (HRC) base prices by INR 1,000-1,500/mt ($14-21/mt), SteelOrbis has learned from market intermediaries and steel mills on Wednesday, February 3.
These sources said that state-run steel mill Steel Authority of India Limited (SAIL) and private sector steelmaker JSW Steel Limited took the lead in increasing benchmark HRC base prices, by INR 1,000/mt ($14/mt) by the former and by INR 1,500/mt ($21/mt) by the latter.
With this, Indian local base HRC prices moved up to INR 53,500-55,000/mt ($733-753/mt) ex-works, market sources said. The tradable prices ex-Mumbai and ex-Chennai were at INR 54,500-55,000/mt ($746-753/mt) ex-works last week amid premiums on base prices. The tradable level in the market is yet to be changed.
On Monday February 1, the Indian government in its national budget for 2021-22 placed before parliament the proposed lowering of customs duty to a unified rate of 7.5 percent for non-alloy, alloy flat steel products and stainless steel flat products, and suspended AD duty and countervailing duties on imports of steel from China until September 30 this year.
However, domestic steel mills have gone in for an increase in local steel prices, defying lower tariff protection after assessing the national budget and concluding that lower import tariffs would have a minimal impact on local pricing, considering that around 60 percent of total steel imports into the country are from Japan and South Korea, which anyway were subject to zero import duty under Free Trade Agreements (FTAs), even before the latest annual budget.
It was also pointed out that any new import bookings would take at least two to three months for arrival at Indian ports and this offered local producers a window to rush through another round of price increases.
According to quick estimates by traders, the post-budget landed price of imported HRC works out at about $758/mt (INR 55,334/mt) after factoring in the new lower import duty. The effective price for the importer would be even higher after factoring in port and logistical costs.
Hence, for the lower import duty to actually benefit end-users, international prices would have to soften significantly from current levels and this could only be a possibility in the medium or longer term, giving domestic steel mills sufficient time and headroom to continue enjoying pricing power, traders said.
$1 = INR 73.00
