Local Indian hot rolled coil (HRC) trade-level prices have remained stable over the past week as market participants pause to assess emerging demand patterns with the approaching end of the monsoon season, the government’s proposed indirect tax reforms, and the onset of the usual busy season for industrial activity in the coming weeks, SteelOrbis learned from trade and industry sources on Monday, August 25.
Sources said that HRC trade prices have remined stable at INR 50,000/mt ($572/mt) ex-Mumbai and are unchanged at INR 51,600/mt ($590/mt) ex-Chennai in the south.
According to the sources, buyers from industrial and trade sectors have been cautious in committing bookings and instead have been taking a pause to assess demand forecasts from several changes expected during the next few weeks.
For one, the end of the monsoon season and the approaching festival season are likely to trigger some demand uptick and improved raw material restocking. However, there is caution that inflationary pressures and high costs of lending could temper down the demand uptick, the sources said.
At the same time, the market sentiment is significantly buoyant following the government’s announcement that the Goods and Service Tax (GST), the indirect tax regime, will be simplified and reduced, with new rates effective as of October 1.
Information trickling in from the government indicates that the GST rates would be reduced to just two slabs of five percent and 18 percent and the highest new rate of 40 percent for a few ‘sin goods’ like tobacco. Since bulk products would be accommodated in the lowest rate, market expectations are that steel products currently attracting an 18 percent GST will move to the lowest rate of five percent in the new indirect tax regime.
At present, the GST has three rates of five percent, 18 percent and a peak rate of 28 percent.
“Even though these are early days yet, the tax reform leading to a lower rate on steel products and products using steel can be a game-changer in boosting demand. We are all optimistic and everyone is doing their own calculation, attempting to gauge the expected demand boost,” a Mumbai-based distributor told SteelOrbis.
“The current situation where buyers are making bookings to meet immediate needs will change very shortly. How much it will change is the moot question,” he added.
$1 = INR 87.34