Liquidity crunch aggravates slowdown in Indian flat steel import activity

Thursday, 12 September 2019 17:08:46 (GMT+3)   |   Kolkata

Indian flat steel import activity continued at negligible levels and even softening of offers failed to trigger any fresh bookings either by end users or merchant traders largely owing to acute shortage of liquidity in the market, compounding demand depression across finished products, traders said on Thursday.

According to market sources, hot rolled coil (HRC) offers from Japan and Korea were at $480/mt CFR Mumbai and sellers were ready to provide additional discounts, but bids were coming at not higher than $460/mt CFR. Ex-China prices went down by $5-10/mt over the week to $480-485/mt CFR.

The sources said that crisis in import market from structural demand depression and unsold stocks of domestic steel mills have been further aggravated by acute liquidity crunch faced by importers.

Pointing out the severe shortage of credit availability to fund trading activity of merchant traders, and fund requirements to re-stock by end-users, the sources said the lending by non-banking financial institutions (NBFCs) which accounted for about 20% of all credit in the country had lowered credit availability by 31% since start of current fiscal.

At the same time, commercial banks burdened with non-performing assets were not extending import financing particularly to small and medium scale traders and actual users, the sources said.

“At a time when local mills were saddled with unsold stocks and no sign of demand revival, which user or trader will risk committing import transactions with his own fund? Volatile local currency is an additional risk and small and medium scale manufacturers do not have capabilities to enter into currency hedging and uncovered currency risk would erode entire margins from sale of imported materials,” a Mumbai based trader said.

The imposition of mandatory registration of imports under Steel Import Monitoring (SIM) system too contributed to imports coming to a standstill, sources said adding that no importer is willing to pay a fee in advance to get registered and then commit import bookings entailing additional funds getting locked up.

Market sources said that not more than 4,000 mt of ex-China HRC were booked during the past week by merchant traders but the entire booking was against existing re-export commitments of these traders.


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