Indian integrated steel mills have continued to push up local hot rolled coil (HRC) base prices for the sixth consecutive week to a six-month high, supported by the commencement of a number of bi-annual supply contract negotiations between bulk end-users and sellers, traders said on Monday, August 10.
Market sources said that base prices for local HRC have been increased by INR 500/mt ($7/mt) to INR 40,800-41,000/mt ($543-546/mt) ex-works, touching a six-month high, amid reports of a tightening of supplies in the market.
Traders said that a number of bi-annual supply negotiations between buyers and sellers have commenced during the past week. Against this backdrop, large integrated steel mills have been keen to push up base prices as these are used as a benchmark for negotiated contracts.
It was pointed out that as, typically, negotiated supply contracts are concluded at a discount on the market price, bulk buyers have been demanding discounts on the June base prices, while integrated steel mills have been insisting on discounts on the current base prices, after the hikes over the past six weeks.
“While it’s a reality that demand in end-use industries of HRC is weak. But supplies in the local market are much tighter than three months ago, largely driven by aggressive exports by integrated steel mills. Also, discounts in merchant sales or negotiated supply contracts will be very limited as producers will have to leverage current prices to offset losses in the immediate months after the national lockdown,” an official at a steel mill said.
“There is a revival in the market after the all-time lows of April-June. The supply side is also getting adjusted with drawdown in inventories. This is providing a cushion for producers to increase prices,” he said.
It was pointed out that most integrated steel mills have stabilized utilization rates at 80-90 percent, and are expected to maintain such levels without pushing them up further to keep supply-side adjustments in balance and support higher base HRC prices.
$1 = INR75.10
