The previous improvement seen in the local Indian cold rolled coil (CRC) market was replaced during the past week by prices softening by INR 300/mt ($4/mt) to INR 39,200/mt ($514/mt) ex-works, as bookings from key end-use industries fizzled out.
According to traders, the short-lived round of new bookings received by integrated steel mills from key user industries indicated the ‘fragile’ nature of the current market conditions.
At least two analysts said that, while demand in the auto industry was rising, sales have mostly been through existing inventories and hence manufacturers have been extremely cautious about making new bookings for raw materials and so weekly trading volumes have not been sustained.
Integrated steel mills and stand-alone re-rolling mills have traditionally depended for about 12-15 percent of total sales on the auto industry, but this percentage is now down to single digits and is expected to remain at such levels for at least the next two to three quarters, the analysts said.
Integrated steel mills will continue to see pressures on CRC prices as they go along towards increasing capacity utilization levels amid weak demand from end-users. The analysts said that most small-volume CRC bookings received by re-rolling mills have been from farm equipment manufacturers like tractor producers but higher volumes from passenger and commercial vehicle manufacturers have still been very limited.
“Since the lockdown in March, we have been increasing production of hot rolled coil (HRC) and keeping re-rolling mills for CRC idle or at minimum capacity utilizations. But this is not a viable medium or long-term strategy as idle re-rolling mills also entail incurring fixed costs and manpower costs,” an official at a steel mill said.
$1 = INR 76.20
