Local Indian hot rolled coil (HRC) prices have gained ground across all local regional markets with most integrated steel mills completing base price hikes over the past week even though trading conditions in the market have remained muted, SteelOrbis learned from trade and industry circles on Monday, May 10.
The sources said that, despite weak demand in the local market, producers were increasing base prices riding on strong export demand and price realizations at the $1,000/mt FOB mark and in order to maintain reasonable spreads between local and export prices.
The sources said that most integrated steel mills, led by ArcelorMittal Nippon Steel Limited (AMNS), completed announcing higher base prices by INR 4,000-5,000/mt ($54-68/mt) to INR 62,000-67,000/mt ($843-911/mt) ex-works with tradable prices reported in the market in the range of INR 67,000-68,000/mt ($911-925/mt) ex-Mumbai. Tradable price levels have increased by JPY 7,000-8,000/mt ($95-109/mt) compared to the previous levels.
“There are a number of contrarian trends in the steel industry. Firstly, domestic demand is getting weaker as more states go into total lockdown and bookings in the local market are steadily falling. The bottom is still unclear. But on the contrary, most steel mills are expected to report some fall in total output during the first quarter. So there will be some support for prices from lower supplies,” a steel sector analyst from a Mumbai financial services firm said.
“But most importantly, higher prices will be sustained by strong demand and prices in overseas markets. Local steel mills are reportedly increasing export allocations for the first quarter. So on balance the bullish sentiment among producers remains intact,” he added.
According to an official from a steel mill, the withdrawal of the export rebate in China will ensure higher steel prices and Indian steel mills will increase their dependency on exports in the coming quarters to offset local demand weakness.
According to rating agency ICRA, China may not have excess volumes to ship overseas and Indian mills will step into the gap. It said ex-India HRC prices are now above $1,000/mt FOB, while local realizations are still below this and producers will inevitably increase export allocations.
However, at least two leading Mumbai-based traders said that indications received from local steel mills are that the latter could go in for another base price hike in the range of INR 2,000-4,000/mt ($27-54/mt) before June to maintain the differential between local and export prices.
$1 = INR 73.51