Undeterred by the second hot rolled coil (HRC) base price hike during the current month effected last week, the local market in India has witnessed heightened heavy restocking activity by dealers and end-users, with all data points indicating tight supplies will be sustained in the medium term, sources told SteelOrbis on Monday, December 21.
Indian steel mills have hiked local hot rolled coil (HRC) base prices for the second time during the current month by INR 2,000-2,200/mt ($27-30/mt), taking base prices to INR 49,500-50,000/mt ($673-679/mt) ex-works. According to trade circles, the effective tradable price in the western regional market around Mumbai has been reported at levels of INR 51,000-51,500/mt ($693-700/mt) ex-Mumbai.
At least two steel sector analysts with Mumbai-based advisory firms averred that, while local HRC prices had been seeking higher levels driven by a build-up of demand after the Covid-19 lockdown, prices have been finding new support from the tightening of supplies, with secondary steel producers unable to increase production and much of the incremental demand being met by integrated steel mills, which would not have much headroom to increase supplies in the medium term, since they are already operating at maximum capacity utilizations.
To back this analysis, it has been pointed out that, while steel production by integrated mills increased eight percent in November, production by secondary steel mills was down six percent during the same month.
That secondary steel mills have not been successful in increasing production and meeting higher demand was also evident from the fact that integrated steel mills’ share in total steel production in the April-November period this year increased to 64 percent from the usual levels of around 55 percent in previous years.
Supply-side pressures were reported to building up significantly in select regional markets around Mumbai in the west and National Capital Region (NCR) in the north with several traders informing SteelOrbis that booking volumes, particularly for early deliveries for February-March, were being cut down by producers, a clear indication of low inventories available.
An official at Jindal Steel and Power Limited (JSPL) said that rough industry estimates indicate that aggregate inventories available at producers currently are not more than the equivalent of 15 days of production, compared to normal levels of 30-45 days.
$1 = INR 73.60