Local Indian hot rolled coil (HRC) prices moved up as integrated steel mills, contrary to market expectations, have commenced increasing base prices, SteelOrbis learned from trade and industry circles on Monday, August 2.
The move to increase HRC base prices was led by ArcelorMittal Nippon Steel Limited (AMNS) which has announced an increase of INR 1,000-2,000/mt ($13-26/mt) to INR 69,000-70,000/mt ($930-943/mt) ex-works on average. The tradable price level in Mumbai is still lagging behind, but it has also started to increase, adding INR 1,000/mt over the past week.
Sources said that most other large integrated steel mills will follow suit with similar base price increases in the current week, even as a section of the market was expecting a minor downward price adjustment in order to factor in sluggish demand.
However, the assessment of producers has been different, prompting them to go in for higher base prices, anticipating a reversal of the demand depression. “We are increasing HRC prices as there are signs of a demand revival. But more importantly Indian domestic prices are still at a large discount to overseas prices,” an official from AMNS Limited said.
Another official from a government steel company which is expected to increase base prices by around INR 1,000/mt ($13/mt) through a formal announcement later today said that producers are confident of the market absorbing higher prices not only because they are still at a discount to the landed price of imports, but they are also supported by the expected rise in consumption during the current fiscal year. Steel companies like JSW Steel and Steel Authority of India Limited (SAIL) anticipate total steel consumption in the current fiscal year will increase to 110 million mt, higher than 90 million mt consumed in the previous fiscal year.
They said that demand during the second quarter (July-September) though sluggish would still surpass total consumption of 24 million mt during the first quarter (April-June) of FY 2021-22 and this uptrend would support higher prices. Also, part of the price increase is cost-driven as imported coking coal prices are forecast to increase by at least $30-35/mt during the second quarter.
However, market intermediaries have maintained a more bearish outlook pointing to the thin trading conditions and low volumes over the past month and the narrow spread between base and traded prices as pointers to low demand. At least two traders said that the positive demand outlook of producers has not factored in the continues risks from the pandemic, pointing out that the second wave plateaued with an average of 40,000 cases per day instead of declining and that the risks of a third wave during the third quarter will continue to impact sentiments in trade circles.
$1 = INR 74.20
