Even though local Indian cold rolled coil (CRC) base prices have been maintained by producers, the market outlook has taken a significant bullish upturn amid reports that integrated steel mills have successfully renegotiated long-term quarterly supply contracts with automobile manufacturers at prices 10-15 percent higher, SteelOrbis learned from trade and industry circles.
Sources said that several steel mills during the past week have concluded supply contracts for the July-August quarter at prices 10-15 percent higher than the previous quarter, setting the benchmark of other mills, which are expected to conclude similar long-term contracts in the current week.
The sources said that, though there is an inevitable lag between the setting of prices through long-term contracts and the impact on spot sales, this is a clear indication that sellers will revise base prices in the coming weeks, by margins expected to be higher than the 10-15 percent increase seen in long-term supply contracts.
Integrated steel mills have maintained base prices at INR 85,000-86,000/mt ($1,145-1,159/mt) ex-works.
Quick back-of-envelope calculations based on higher negotiated prices with buyers in the automobile industry done by traders showed that the market is expecting a minimum base price increase of at least INR 8,000/mt ($107/mt) if the difference between negotiated price contracts and merchant sales is to be maintained.
It was pointed out that bookings during the past week improved with most automobile companies resuming operations at full capacity during the week, which also supported stand-alone rerolling mills in liquidating stocks built up over the recent lockdown weeks.
The drawdown in inventories and sustained bookings by user industries will offer a sufficient window for producers to effect a price push in the coming weeks, the sources said.
$1= INR 74.20