Local Indian hot rolled coil (HRC) prices have increased in reaction to large mills taking the lead in commencing base price hikes for March deliveries, but some discounted small-volume sales have continued to be reported in the northern region as distributors have focused on fiscal year-end liquidation of older stocks, SteelOrbis learned from trade and industry circles on Monday, March 10.
Sources said that HRC trade-level prices have increased by around INR 1,250/mt ($14/mt) to the range of INR 50,250/mt ($575/mt) ex-Mumbai and are up by INR 500/mt ($6/mt) to INR 50,500/mt ($578/mt) ex-Chennai in the south. However, according to the sources, some distributors in the north are heard early in the week to be confirming bookings at INR 49,000/mt ($564/mt) net of discounts to liquidate old inventories and get cash on the books for the year-end on March 31.
Most in trade and industry circles maintain that the base price increases are promoted by expectations of the safeguard duty imposition and the tightening of supplies as some large mills go in for maintenance shutdowns in the current month. But with trade volumes continuing to be low amid sustained weak industrial demand, the impact of base price increases at the trade level is likely to be minimal.
In fact, a section of traders even speculated that trade-level prices would prevail at a discount to mills’ revised price lists for March, as both producers and traders would attempt to push higher volumes in the market. However, they acknowledged that this premise and the outlook of local market dynamics could change dramatically if the much-talked-of safeguard duty became a reality.
“We will see some resistance from buyers in the market, as prices are being increased riding on protectionist hopes and the supply-side tightening and not on any demand improvement,” a steel sector analyst with a Mumbai-based financial advisory firm told SteelOrbis.
“In the short and medium terms, the market faces both downside and upside potential. Both hinge on the much-talked-off safeguard duty. If such a duty speculated in the wide range of 12-25 percent becomes a reality, HRC trade prices have headroom for another INR 3,000/mt ($35/mt) rise at the trade level. If, however, the government goes back on the proposed levy, the downside risks to trade prices can be significantly much larger,” he added.