Local Indian hot rolled coil (HRC) tradable prices have increased as discounts have been withdrawn during the past week in response to several analysts forecasting higher-than-expected base price hikes by integrated steel mills over the next few weeks, SteelOrbis learned from trade and industry circles on Monday, April 5.
Sources said that several analysts including brokerage houses like Motiwal Oswal and Edelweiss Capital has put out reports forecasting base price increases in the range of INR 3,500-4,000/mt ($48-54/mt), compared to earlier estimates of INR 2,000-3,000/mt ($27-41/mt).
According to sources, tradable prices have bounced back to the range of INR 52,000-53,500/mt ($707-728/mt) ex-Mumbai, up from INR 50,000-51,000/mt ($680-694/mt) ex-Mumbai a week ago.
HRC base prices have been maintained this week at INR 53,500-55,000/mt ($728-748/mt) ex-works, the sources said.
According to brokerage house Edelweiss Capital, production cuts in Tangshan in China and the possible lowering of the export tax rebate are expected to reduce Chinese steel production by 22 million mt and this will support higher international prices. The lower production will be matched with lower exports and Indian producers are banking that a lack of import competition will support higher base prices in the local market.
However, a number of market participants, including two leading Mumbai-based trading firms, said that the imminent base price increase by producers is coming at a time when more stringent lockdowns are being imposed across key manufacturing states like Maharashtra and Punjab, with more regions to come under lockdowns over the next few weeks in order to check the second wave of the pandemic, and this would not only disrupt supply chains, but also weaken demand, hamstringing buyers’ ability to absorb higher prices.
Clearly, steel producers are focusing on leveraging pricing to reduce debts on the balance sheets. It is estimated that the top five integrated steel mills have targeted an aggregate debt reduction of $4.8 billion in the current year. Whether demand will sustain the planned price increase is yet another issue altogether,” the chief executive of one of the trading firms said.
$1 = INR 73.50
