A fortnight-long stability in the local Indian hot rolled coil (HRC) market has given way to a soft trend during the past week, with prices softening by INR 500/mt week on week to INR 36,750/mt ($515/mt) ex-works, amid domestic steel mills’ higher inventories and negligible bookings by end-users as bearish sentiment over the manufacturing sector deepened, traders said on Monday, August 19.
“Virtually all key drivers are negative. Large steel mills like Steel Authority of India Limited (SAIL), Tata Steel and JSW Limited are facing inventory build-ups. This, coupled with the fact that local steel mills have decided to keep base prices unchanged for current month deliveries, is only worsening trade conditions in the market,” a Mumbai-based trader said.
“Market intermediaries too have completely halted any fresh bookings as they are already carrying large unsold stocks. Added to this is the fact that bank lending towards working capital is very limited and hence few traders are willing to make bookings and further worsen their own liquidity position,” the trader added.
Traders have confirmed that a few market intermediaries particularly in the western and northern regional markets have commenced offering discounts of around INR500/mt ($7/mt) to liquidate their high-cost inventories and improve their internal cash flows.
A steel sector analyst with a Mumbai-based consultancy and advisory firm said that pricing has lost relevance in any revival in the market because the basic constraint currently is the sharp contraction in consumption and domestic demand for finished products in the economy, which is having a debilitating impact on finished steel sales.
$1 = INR 71.37