Workable price levels for local hot rolled coil (HRC) in India have surged during the past week, with domestic integrated steel mills hiking base prices for December deliveries, amid low inventories. At the same time, higher premiums on bookings by dealers and market intermediaries have been reported in the regional markets in India, SteelOrbis learned on Monday, December 7.
Market sources said that a number of integrated steel mills commenced announcing increases in base prices over the past week, pushing them up by around INR 2,500/mt ($34/mt). Thus, the effective ex-works price is currently pegged at INR47,500-48,000/mt ($643-650/mt) ex-works, traders said.
According to checks in the market by SteelOrbis, the most tradable price is on a par with the base price of producers, while in fact in select regional markets premiums have pushed workable prices visibly above the base prices for bookings concluded by dealers.
Sources said that, in western regional markets around Mumbai, HRC premiums have prevailed at around INR 1,000-1,500/mt ($14-20/mt) over the base price - with the tradable level reaching INR 48,500-49,500/mt ($656-670/mt) ex-stockyard. Premiums have been even higher in northern regional markets around National Capital Region (NCR) at around INR 2,000/mt ($27/mt), and so the tradable price level there has reached INR 49,500-50,000/mt ($670-677/mt) ex-stockyard.
It has been pointed out that high trading volumes and large-volume fresh bookings by both end-users and market intermediaries indicate that higher prices are not only being absorbed by the market, but that another round of price increases in mid-December is a distinct possibility.
A number of market participants said that there have been several indications that the government will go in for an across-the-board increase in customs duty on flat steel products and, although import pressures are negligible at present, higher tariff barriers would further boost the bullish sentiments.
They said that the fundamentals of the market also indicate headroom for a further increase in local HRC prices with average inventories at producers estimated at not more than the equivalent of 15-25 days of production and the landed imported price still about 6-10 percent above the current ex-works local price.
“It is a blockbuster market for steel producers. Even though input costs are rising, producers have increased prices four times since October and are expected to continue to do so for the rest of the quarter multiple times. This is expected to push margin realizations to an all-time high,” a steel sector analyst with a Mumbai-based financial services firm said. “Domestic demand is recovering beyond expectations, while there are limits to higher supplies in the medium term and no new capacities coming on stream which will continue to support higher prices and a strong boost of earnings before interest, tax, depreciation and amortization (EBITDA) of producers,” he added.
$1 = INR 73.90
