Local Indian hot rolled coil (HRC) prices have slumped by INR 1,000/mt during the past week to INR 35,750/mt ($500/mt) ex-works, as domestic steel mills have faced severe pressures from unsold stocks and both market intermediaries and end-users have virtually stopping fresh bookings, traders said on Monday, September 16.
“Both dealers and large steel mills are facing unprecedented levels of unsold stocks. Unofficial reports received from several large mills indicate that stock levels have surged up to the equivalent of 60-70 days of production, from the normal average of around 30-40 days. There are just no buyers in the market,” a Mumbai-based trader said.
“Some large mills like JSW have already issued warnings of production cuts if there is no demand revival over the next one month. Large steel mills are aggressively pushing exports to keep their heads above water. But exports cannot be a medium-term solution given the large domestic production capacities and the ability to aggressively price exports is limited when the Indian rupee has reversed its falling trend and has been seen to be appreciating against the US dollar since last week,” a source said.
Market intermediaries are continuing to offer discounts ranging INR 1,000-1,500/mt ($14-20/mt) even after the fall in base prices, indicating the acute depression in the market. This effectively puts local HRC prices at a three-and-a-half-year low, the traders said.
“Dealers are facing the worst problem. They are not only having to carry large unsold stocks, incurring carrying costs, but are also facing pressures from lending institutions to meet repayment commitments against working capital borrowings,” one trader said.
$1 = INR 71.48
