Local Indian cold rolled coil (CRC) prices have touched a new peak after producers increased base prices by around INR 2500/mt ($34/mt) to INR 58,800-59,500/mt ($799-808/mt) ex-works and, despite uncertainties of outlook for the new year among key consuming industries like automobile and consumer durables, the market has witnessed steady bookings from end-users and restocking by dealers anticipating tight supplies from producers, traders said on Monday, December 21.
The traders said that cautiously optimistic sentiments in the automobile industry are being counterbalanced by tight supplies of CRC in the market with integrated steel mills having limited availability of hot rolled coil (HRC) for captive conversion, while consuming industries are maintaining restocking of CRC despite being uncertain whether the rebound in festive sales during the October-November period will be sustained for the rest of the current fiscal year.
The negative outlook for auto sales largely stemming from the fact that manufacturers are being forced to increase passenger car prices from the current month onwards to factor in the rising price of CRC, which might be a dampener to higher sales seen during the past few months, market participants said.
“Overall there will be challenges given the uncertainty of the pandemic and implications on the supply chain. These supply issues will continue for some time to come and will continue to create short-term challenges,” Vijay Nakra, CEO Automotive Division, Mahindra and Mahindra, said. “Some of the challenges being a shortage of steel and micro-processors,” he added.
According to an analyst, the raw material cost index of the automobile industry was up six percent in the April-November period this year, compared to the corresponding period of the previous year, with the cost of steel rising 30 percent among all inputs for passenger cars. Considering that car purchase price sensitivity has increased post-pandemic, any increase in the price of cars will dampen sales and, without a price increase, the capacity of manufacturers to restock CRC at historically high costs will be limited too, the analyst said.
$1 = INR 73.60