Indian integrated steel mills have increased hot rolled coil (HRC) base prices during the past week, but trading volumes have taken a sharp dip in reaction with market participants expecting that higher prices in the current demand situation in the local market will not be sustainable, SteelOrbis learned on Monday, July 6.
Market sources said that integrated steel mills have increased base prices by around INR 500/mt ($7/mt) week on week to INR 38,300/mt ($514/mt) ex-works, after aggressive discounting was halted in earlier weeks.
It was pointed out by traders that in June local HRC prices were down by 4-5 percent (month on month) net of discounts and integrated steel mills have been attempting to reverse the further slide in prices after withdrawing all discounted sales for July deliveries.
According to an official at a state-run steel producer, the hike in base prices under compulsion to improve realizations per metric ton (sales minus costs of all raw materials) as this is important to maintain the profitability of asset operations.
However, market participants and traders have said that the sharp fall in trading volumes seen during the past week is an indication that market conditions are not conducive to absorbing higher prices because end-users are still unwilling to restock given fresh uncertainties of rising virus cases across the country and the uneven easing of lockdown conditions in several regions in India.
At the same time, most integrated steel mills have increased plant production levels to above 80 percent over the past one month and because of this, along with already large inventories and without any corresponding increase in demand, prices are expected to come under renewed pressures and a fresh round of discounted sales by producers cannot be ruled out, sources told SteelOrbis.
$1 = INR 74.50