Local Indian rebar prices continued to consolidate at higher levels in the past week with producers pushing up prices prompted by government moves to bail out a section of the construction industry, and amid anticipation of higher rebar demand, SteelOrbis has learned.
The traders said that rebar demand is expected to revive following the government move to set up a specific $3.52 billion fund to offer fresh finance to incomplete real estate housing projects across the country and which is expected to get back on track at least 1,500 stalled housing projects.
Reacting to the government move during the past week, small and medium-scale rebar producers increased prices by INR 500/mt ($7/mt) to INR 33,000/mt ($462/mt) ex-stockyard. Large producers increased prices by INR 350/mt ($5/mt) to INR 34,000/mt ($476/mt) ex-stockyard.
However, some market participants and producers are cautious, expressing doubts over the sustainability of the current uptrend in the rebar market. They said that, with most macro indicators showing sharp negatives, it is unlikely that just a sectoral palliative like funding of stalled housing projects will stabilize prices in the medium and long term.
The traders pointed out that the Index of Industrial Production (IIP) declined 4.3 percent during September 2019, the sharpest fall over the last eight years, while electricity generation, a key indicator of economic growth was down 2.6 percent during the month, adding that these showed up deeper structural problems which would continue to prevent prices from sustaining consolidation at higher levels.
“There has definitely been an improvement in sentiments. But not in the case of fundamentals which alone can ensure sustainability of prices,” a manager at Rashtriya Ispat Nigam Limited (RINL) said.
“The government funding announced last week will partially improve housing demand, which is just a part of the larger construction sector. There is no visible sign of increased purchases by large government infrastructure projects, the mainstay of large integrated steel mills which rely heavily on governmental procurement,” he added.
$1 = INR 71.50