Indian rebar mills reverse strategy, cut base prices to liquidate stocks

Tuesday, 12 May 2020 14:48:48 (GMT+3)   |   Kolkata
       

Large Indian integrated steel mills have announced revised long product base prices for current month deliveries, lowering rebar prices to give higher priority to liquidating inventories, prompting small and medium secondary producers to follow suit, SteelOrbis has learned on Tuesday, May 12.

Market sources said that integrated steel mills have cut rebar prices by INR 500/mt ($7/mt) to INR 38,700/mt ($511/mt) ex-stockyard. Secondary rebar producers have been forced to adjust their prices, lowering them by INR 300/mt ($4/mt) to INR 31,500/mt ($416/mt) ex-stockyard.

Traders said that the downward revision of base prices was a reversal of the price strategy of producers earlier in the month attempting to push up prices.

Increasing prices at a time when most producers are carrying extremely large inventories and construction demand has been edging up but at a very slow pace has failed as a strategy to push higher volumes in the market. Producers have been revising their pricing strategy to lower prices, liquidate inventories and improve cash flows at a time when the demand recession in the construction industry is expected to be prolonged over the medium and long terms.

According to a recent report by accounting firm KPMG, investments in the Indian construction sector which employs 50 million people are expected to see a contraction in the range of 13-30 percent due to the impact of Covid -19 and every big ongoing project would be affected.

“Large bookings from infrastructure projects will take a long time to come. In the meantime, we are banking on small bookings from smaller projects in real estate and smaller infrastructure projects in semi-urban and rural areas. We have sufficient inventories to meet this modest emerging demand as restrictions of the lockdown are phased out progressively,” a manager at Rashtriya Ispat Nigam Limited (RINL), a state-run long product manufacturer, said.

“We have to be very careful in our pricing. We have to keep pushing volumes on thin margins and attempt to keep such margins positive by efficient cost management in a low demand market,” he added.

$1 = INR 75.70


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