Indian cold rolled coil (CRC) trade prices have softened over the past week amid negative sentiments emanating from reports of long-term supply contract negotiations between standalone re-rollers and buyers hitting roadblocks, delaying the signing of deals, SteelOrbis has learned from trade and industry circles.
The Indian benchmark 0.9 mm CRC trade price has lost INR 2,000/mt ($26/mt) to INR 83,800/mt ($1,102/mt) ex-Mumbai and to INR 84,700/mt ($1,114/mt) ex-Chennai in the south.
Several trade sources said that long-term supply contract negotiations have been hit by differences between rolling mills and buyers, leading to apprehensions of inventory rises in the first quarter of the fiscal year (April-June). It is heard that re-rolling mills are insisting on a price-escalation clause in supply contracts replacing the fixed price based on the average price of the previous six months.
Also, re-rolling mills for their part are seeking to incorporate a penalty clause for buyers for defaults in taking deliveries of specific volumes as scheduled in contracts, as in recent months some user industries have been deferring accepting stocks as per contracts, leading to sellers having to bear the carrying cost of higher inventories.
According to the sources, delays in the conclusion of long-term supply contracts hold risks of inventory pile-ups in the first quarter and supply-side pressure on spot trade prices.
This will compound the negative impact of sustained declines in the automobile sector in March and the trend is expected to continue going forward, precluding any demand revival for CRC.
Automobile sales, a key demand indicator for CRC, recorded a six percent decline in the fiscal year 2021-22 and this is not expected to be reversed significantly in the current year either.
$1 = INR 76.00