Local India hot rolled coil (HRC) prices have remained stable during the past week at INR 38,200/mt ($502/mt) ex-works as the market prepares for the end of the first phase of lockdown on April 14.
According to sources, there have so far not been any signals regarding new base prices from any of the domestic steel mills. The market is expecting producers to wait for indications on how the lockdown restrictions will be eased by the government, although a section of the market considers that base prices would need to be lowered to cope with the rise in mills’ inventories during the national lockdown and the negligible off-take since March 25.
A section of the market maintains that local steel mills will need to lower base prices by at least INR 500/mt ($7/mt) to manage inventories. However, the size of the adjustment of prices in the local market will be determined by local steel mills’ aggressive push for exports through a combination of sharp cuts in export prices backed by the local Indian rupee falling to a historical low of INR 76.20 to the US dollar during the past week.
If export volumes continue to increase as seen over the past few weeks and ease the pressures of rising inventories, local steel mills could also maintain domestic base prices unchanged, at least two traders said.
“Going forward, pricing will be a very big challenge either way. Major user industries are shut down. Steel mills have to keep producing at lower capacity utilizations even with low demand, as shutting down blast furnaces entails huge costs. There are limits to which prices can be cut too,” a manager at a steel mill told SteelOrbis.
“Even if the lockdown is eased, it will take a long time for the market to revive. Market conditions are very uncertain. What is certain is that the recovery will be U-shaped and not V-shaped,” he added.
$1 = INR 76.05
