Local Indian hot rolled coil (HRC) prices have increased by INR 1000/mt ($14/mt) week on week to INR 35,750/mt ($500/mt) as most large domestic steel mills have raised their base prices during the past week, SteelOrbis has learned.
Steel mills have taken a risky pricing strategy of increasing HRC base prices by a range of INR 1,000-1,200/mt ($14-17/mt) for current month deliveries even despite still thin trading activity and low demand from end-users. Traders said that most of the large steel mills are seeking higher prices to improve margins, increase aggregate sales revenues and de-risk balance sheets already loaded with high debts.
“While an increase in HRC base prices was expected by the market, the quantum of the hike has taken market intermediaries by surprise. Considering the thin trading activity and falling manufacturing sector growth overall, I would expect the higher prices to face resistance. It will also be interesting to watch how local steel mills keep pushing volumes in the market to check inventories. I am also looking to see discounts resurfacing before year-end considerations kick in,” a Mumbai-based trader said.
However, local steel mills have said that the hike is in anticipation of a demand revival in the market. “We have seen some revival in demand for HRC during November, which provided us scope to push up base prices,” a manager at a western India-based steel mill said.
“We will calibrate base prices as we move into the New Year keeping a close watch on how the demand revival plays out. We do not rule out another base price revision later this month if our anticipated recovery in the market fructifies. Traditionally, October-March are usually the strongest quarters in terms of demand and we feel that this will still hold true now,” he added.
The landed price of imports has also gone up, by about $40/mt over the past quarter, and considering the rupee remains weaker than the INR 71 to the US dollar mark, higher prices can be absorbed by the market, according to sources.
$1 = INR 71.50