The local Indian hot rolled coil (HRC) market has showed signs of a further slow recovery in the past week as base prices remained unchanged at INR 37,800/mt ($499/mt) ex-works, while all discounts have been completely withdrawn in all regional markets in the given week, SteelOrbis has learned on Monday, June 29.
HRC prices in northern Indian regions have remained at the level of base prices, while prices in the western regional market have added INR 300/mt ($4/mt) week on week to INR 37,800/mt ($499/mt) ex-works.
According to traders and two officials at private integrated steel mills, almost all producers in the primary and secondary sectors have been increasing production levels over the past month and are now averaging higher than 80 percent. Market conditions do not offer any window to increase base prices and the only option to increase margins has been to withdraw discounts even at the risk of impacting volumes traded in the market.
“During the lockdown since the end of March, most integrated steel mills were supported in bringing back capacities into production by HRC shipments to China. But steel mills are acknowledging that Chinese imports are a temporary phenomenon and the number of contracts will start to ease off over the next one or two quarters,” a steel sector analyst at a Mumbai-based financial advisory firm said.
“Withdrawal of aggressive discounting is a sign of readying for such changes in the export markets and going for even limited improvements in domestic sales realizations. Base price hikes are not an immediate possibility considering the sluggish demand,” he added.
Market sources citing reports from a leading research firm said that operating profits of integrated steel companies are expected to fall 20-30 percent in the current fiscal year and hence producers will have to take all measures to minimize the impact, exploring all options of improving sales realizations.
However, according to an official at JSW Steel, the option of increasing base prices is definitely not off the table and would be considered at the “right time taking market conditions into account”.
$1 = INR 75.70