Local Indian hot rolled coil (HRC) prices have remained stable for the second consecutive week at INR 37,250/mt ($524/mt) ex-works, with domestic steel mills deciding to maintain base prices unchanged for current month deliveries and attempting to push higher volumes overseas although negative sentiments have persisted across market segments, traders said on Monday, August 12.
“The stability in HRC prices might not be telling the true story for the medium- and long-term because underlying market dynamics continue to be very bearish,” a Mumbai-based trader said, citing just-released government data showing the country’s total factory output growth at two percent in June this year, compared to seven percent growth in June 2018, indicating a steady fall in demand for raw materials.
“Steel mills are citing rising prices of raw materials such as iron ore for maintaining their base prices and the absence of any price adjustments also precludes any impetus towards triggering demand,” the trader added.
According to a steel sector analyst with a Mumbai-based financial consultancy firm, local HRC prices will continue to face significant downside risks as prices are not merely being impacted by demand-supply market dynamics, but deep structural macro-economic indicators all pointing towards a worsening of the economic slowdown will continue to put pressure on raw material for the manufacturing sector.
The analyst pointed out that cuts in capital expenditure by large steel plants like Tata Steel announced by the company point to such a structural slowdown in the economy and hence HRC price stability, seen during the past two weeks, will be elusive.
$1 = INR 71.03