Local Indian hot rolled coil (HRC) prices have continued to suffer setbacks from weakening demand from industrial users following the rapid spread of rains across southern and western regions, combined with very low fresh bookings in trade which has been facing severe liquidity challenges, SteelOrbis learned from trade and industry circles on Monday, June 2.
Sources said that HRC trade prices have lost INR 700/mt ($8/mt) to INR 51,300/mt ($601/mt) ex-Mumbai and are down INR 200/mt ($2/mt) to INR 52,800/mt ($618/mt) ex-Chennai in the south.
The sources said that, while demand from industrial users has been sagging for the past several weeks, new challenges in liquidity faced by trade have added to bearish sentiments becoming more widespread.
It has been pointed out that the liquidity situation is in a “vicious cycle” with traders unable to push sales unless extending credit periods beyond 30 days, which in turn has resulted in a slowdown in resolutions of receivable bills and in cash flow, hence reducing traders’ ability to restock through new bookings.
“The sustained downtrend is worrying as it comes even amid market chatter that the government is planning to increase the safeguard duty on imports from 12per cent to 24 percent. This indicates that prices are weakening on the more fundamental issue of weak demand and not so much on import competition pressures,” a Mumbai-based trader told SteelOrbis.
“With the monsoon season just beginning, we do not expect any improvement in trade volume or price over the next several weeks. The biggest issue for us is that payments against sales already completed are taking very long to come through. We are doing business with minimal cash in our books,” he added.
$1 = INR 85.44