Indian mills seek to renegotiate 6-month CRC contracts with automakers before spot prices drop

Monday, 01 February 2021 16:45:47 (GMT+3)   |   Kolkata
       

Local Indian cold rolled coil (CRC) prices have been maintained unchanged during the past week with steady premiums, but a number of producers are reported to be pushing to renegotiate existing six-month supply contracts with automobile manufacturers to lock-in supplies at the current high spot prices, SteelOrbis learned on Monday, February 1.

Sources said that reports in the market indicate that JSW Steel Limited triggered the trend by seeking a revision of its existing long-term CRC supply contracts with automobile makers and to benchmark it to the current higher base spot price.

Though steel mills do not disclose their longer contract prices with their buyers, market sources have indicated that, on average, existing contract prices of producers are at a 5-12 percent discount to current spot base prices of respective supplying steel mills, and that the latter are seeking a revision of contracts to bridge this discount, sources said.

At least two traders said that the seeking of renegotiations of existing supply contracts could be an indication of the current high prices not being sustainable over the medium term, and hence the strategy of sellers to lock-in prices of supplies at current prices and on a par with spot base prices.

Sources said that integrated steel mills have maintained CRC prices during the past week at INR 60,000-60500/mt ($821-826/mt) ex-works and additional premiums averaging at INR 1,500/mt ($21/mt).

However, at least two traders said that some steel mills have hinted at a continued increase in prices, with base prices expected to be hiked by INR 1,500-2,000/mt ($21-27/mt) in the current month if the national budget offers tax incentives to passenger car makers and if higher infrastructural spending giving a boost to sales of commercial vehicles.

$1 = INR 73.00


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