Local Indian hot rolled coil (HRC) prices have remained at higher levels during the past week but in the midst of a fall in trading activity, with buyers preferring to defer fresh bookings following reports that the government is considering “corrective measures” to check rising prices, traders said on Monday, December 28.
It has been learned from several market participants that there have been conflicting signals with producers considering another base price increase over the next few weeks, while the Indian government is holding a meeting to impose measures like a cap on export prices of iron ore to ease raw material supply constraints and the cost push on steel mills, and lowering import duties for steel to increase price competition in the local market.
Both end-users and dealers have been tending to defer fresh bookings and wait for any government measures to adjust the market, the sources said, adding that no buyer was willing to conclude bookings at premiums which prevailed in select regional markets around Mumbai.
Sources said that local base HRC prices have remained at INR 49,500-50,000/mt ($673-679/mt) ex-works.
According to a steel sector analyst at a Mumbai-based advisory firm, the landed cost of ex-China HRC was at a discount of around 6-10 percent of the local price and any lowering of import duty would increase the differential, which could prompt local producers to defer any immediate price hike.
But, holding a contrarian view, at least two other traders said that the demand revival among user industries continues to remain very strong backed by a shortage in supplies, and increased imports from lower duties would only partially meet incremental demand and producers will still hold considerable pricing power.
Citing available industry estimates, they said that aggregate inventory at steel mills at the end of November was around 10 million mt, down from 14 million mt in April this year, and indicative that supply-side support will continue to enable producers to increase prices during the rest of the current fiscal year.
$1 = INR 73.60