Indian steel mills have kept their local rebar prices unchanged during the past week, even as domestic producers effected sharp hikes in flat product prices, indicating divergent trends in the domestic steel market with long products continuing to suffer from a demand depression, SteelOrbis learned on Tuesday, September 8.
In contrast to flat product user industries which are showing significant signs of recovering from the impact of the pandemic, long product key-user industries like construction and real estate development are languishing from the twin blow of a demand recession and the liquidity crisis in user industries, the traders said.
According to market sources, both integrated steel mills and secondary producers have kept prices unchanged largely because producers do not have any leeway to further cut prices owing to rising costs of both iron ore and scrap in the local market.
Integrated steel mills have maintained rebar prices at INR 36,200/mt ($493/mt) ex-stockyard, while secondary producers have kept prices unchanged at INR 30,400/mt ($415/mt) ex-stockyard.
At least two traders and a financial analyst at a Mumbai-based financial advisory firm said that sentiments and outlook for the rebar market have taken a hit from reports that a Reserve Bank of India (RBI) panel appointed to advise on restructuring on bank loans to all pandemic-affected industries and services sector did not specify the construction industry as part of the list of industries where companies would qualify for restructuring of their debts.
While construction may be listed in the fine print of the official detailed report once published, the construction sector which had contracted by the largest margins of 50 percent during the first quarter of the current fiscal year requires immediate relief as most construction companies are reeling from debt and repayment liabilities.
Unless construction companies are revived, demand for inputs like rebar in the case of large infrastructure projects will not revive and rebar producers will continue to face the steady slowdown in stock movements seen over the past several months.
“Secondary steel mills producing rebar exclusively are the hardest hit. With a limited product portfolio of only long products for construction, they have little capacity to absorb the rising cost of both iron ore and scrap without any pricing power for rebar,” an official at Shyam Steel, eastern India’s largest rebar producer, said.
$1 = INR 73.40