The local Indian cold rolled coil (CRC) market has continued to gain upward momentum with prices surging on likely base price hikes by producers and expectations of improved consumption from key sectors, with several participants claiming that prices were being driven by sentiments rather than by fundamental demand, which remains cautious, SteelOrbis learned from trade and industry circles on Monday, February 7.
The local CRC traded prices have moved up sharply by INR 2,500/mt ($33/mt) to INR 70,400/mt ($942/mt) ex-Mumbai and up by a similar amount to INR 70,000/mt ($937/mt) ex-Chennai in the south.
According to a steel sector analyst with a Mumbai-based financial advisory firm, even though CRC prices have recorded major gains over the past two weeks, the fundamentals of demand and particularly its divergence seen in the market compared to other flat products was a cause of concern.
He pointed out that the spread between CRC trade prices and those of hot rolled coil (HRC) had narrowed to a one-year low and is currently less than INR 4,000/mt ($55/mt), down from about INR 15,000/mt ($200/mt) a year ago, indicating a rapid rise in prices of HRC and relatively sluggish movement of CRC and being a disincentive for value addition by mills.
The analyst said that the narrow spread could be attributed to the fact that the pandemic waves over the past year had impacted manufacturing consuming industries like automobile and consumer durables where demand is driven more by discretionary consumer spending. At the same time, Indian exports of CRC which had spiked in mid-2021, providing support to prices, are cut by almost half now.
According to the analyst and traders, the CRC upside price potential continues to face headwinds due to the shortage of components faced by the automobile industry, limiting increases in production and hence raw material restocking, and mills would continue to keep low-volume allocations for captive re-rolling for at least two to three months going forward.
$1 = INR 74.70
