The downslide in local Indian hot rolled coil (HRC) prices has gained momentum amid the combined pressures of rising inventories, the slump in overseas sales over the past month, expectations of further declines, and cautious bookings by end-users, SteelOrbis has learned from trade and industry circles.
Local HRC traded prices have fallen by a significant margin of INR 1,500/mt ($20/mt) over the past week to INR 65,300/mt ($859/mt) ex-Mumbai.
A number of market participants have said that there are expectations that producers will be forced by rising inventories and low export allocations in the last quarter to cut base prices by at least INR 4,000/mt ($53/mt) in the New Year to push higher sales before end of the fiscal year, and this has prompted distributors and end-users to defer new bookings.
“In the 2022 calendar year, local HRC prices will face downside risks of 10-12 percent. In the near term, our assessment factoring in base price cuts of producers and the absence of a big demand uptick is for the next traded price target in a range of INR 53,500-56,000/mt ($703-737/mt),” a steel sector analyst with a Mumbai-based financial advisory firm said.
“The historical peak in prices seen around June-July this year was largely driven by local steel mills increasing overseas sales. This has run its course now with prices in China softening steadily. At the same time, Indian steel production has increased 26 percent in the April-November period. Exports were down 31 percent in November, month on month. So, there is a lot of material floating in the local market, putting prices under sustained pressure,” he said.
According to a Mumbai-based steel distributor, even after the sustained six-week decline in prices, local HRC prices are still at a premium of 6-10 percent over the landed price of ex-China prices, but still there has hardly been any import booking activity in December, largely because Chinese mills are not submitting offers in India. On the other hand, Indian mills’ export realizations on nominal sales overseas are at a discount to local sales.
$1 = INR 76.00
