Local Indian cold rolled coil (CRC) prices have surged during the past week in anticipation of base price increases by producers over the next few weeks and robust March growth in key consuming sectors like automobiles, SteelOrbis has learned from trade and industry circles on Monday, April 5.
Sources said that several producers in the automobile industry recorded healthy double-digit and even triple-digit sales growth in March this year, boosting market sentiment and expectations of strong raw material restocking even at higher price levels.
However, some traders pointed out that the March sales growth was due to the very low base in March 2020 when the national lockdown had been imposed to control the pandemic and several days of sales were lost as a result.
Sources said that, while base prices have been maintained by integrated steel mills at INR 58,500-59,000/mt ($796-803/mt) ex-works, traded prices are up to INR 62,000-63,000/mt ($844-857) ex-Mumbai compared to the traded price which was level with the base price a week ago, with premiums being attributed to the expected base price increase.
According to two traders, the market is expecting a base price increase in the range of INR 3,000-4,000/mt ($41-54/mt).
However, expressing caution and doubts over the market’s ability to absorb higher prices, a steel sector analyst with a Mumbai-based financial services firm pointed out that the revival in the automobile industry was not deep enough and was only restricted to passenger cars, while other segments like commercial vehicles and two-wheelers are still at a decadal low since the pandemic.
The analyst said that, against the backdrop of sales growth, it should be kept in mind that sales were still around 20 percent in negative territory compared to the highs of sales in the pre-pandemic period in 2018-19, indicating that the industry as a whole is still very precarious and with limited ability to absorb higher input costs.
$1 = INR 73.50