Local Indian hot rolled coil (HRC) trade prices have lost ground rapidly amid a combination of the deepening negative outlook for demand and market intermediaries pulling back in the face of rising costs of working capital and considerations related to the end of the fiscal year, SteelOrbis learned from trade and industry circles on Monday, March 20.
Indian HRC trade prices are down INR 700/mt ($8/mt) to INR 60,000/mt ($727/mt) ex-Mumbai and have lost INR 1,000/mt ($12/mt) to INR 59,200/mt ($718/mt) ex-Chennai in the south.
According to a steel sector analyst with a Mumbai-based financial advisory firm, trade intermediaries have been complaining of the rising cost of working capital borrowings from banks which they were finding difficult to access at a time when total business volumes and turnover have been slowing down rapidly.
He said that movement of material from mills to dealers and then to the market was slowing down week on week, resulting in dealers facing rising inventories and resultant pressure on working capital remaining locked up, increasing the interest cost of borrowed funds. Hence, dealers have been rapidly retreating from the market also because they were busy closing their books of accounts for the year-end and preferred to conserve cash on books.
“Domestic prices have been pushed up too fast by mills and are now almost de-coupled from prevalent low-demand market conditions. Producers are aggressive in increasing prices, driven by strong sales overseas,” a Mumbai-based distributor said.
“Economic growth indicators are all sluggish. Industries are cautious in committing funds in restocking raw materials, while dealers are getting cash-strapped from slow movement of material and higher inventories,” he said.
On the contrary, at least two officials at private mills said that further base price hikes in April are “very much on the table”, claiming higher input costs would need to be passed on to buyers.
$1 = INR 82.50
