The local Indian rebar market has continued to show signs of softening with premiums being pulled back by sellers even as buyers and sellers reassess the impact of the national budget and as the market finds a new direction, sources told SteelOrbis on Tuesday, February 2.
The sources said that the market will need to find a new direction balancing the conflicting impact of the national budget, which on the one hand lowered import tariffs and protection for domestic steel producers, triggering negative sentiments, while on the other hand the government has significantly increased infrastructure spending that would have spin-off triggers for higher demand for long products.
Sources said that integrated steel mills have maintained rebar base prices at around INR 49,000-49,500/mt ($671-678/mt) ex-stockyard, while secondary producers have kept base prices unchanged at around INR 47,000/mt ($643/mt) ex-stockyard. However, indicative of weak demand and user industries like real estate developers largely slowing down fresh bookings, there was observed an almost near withdrawal of any premiums charged on ready deliveries, which ranged INR 500-1,000/mt ($7-14/mt) a week ago.
According to a steel sector analyst with a Mumbai-based financial services firm, the government had lowered import duties on all grades of long products to a uniform rate of 7.5 percent from levels of 10-12.5 percent earlier, which turned the mood among producers negative. He pointed out that, though Indian imports of long products are negligible traditionally, quick back-of-envelope calculations showed that the landed price of imported rebar at the proposed lower tariff would work out to be cheaper on landed-price basis compared to current domestic prices.
“It is still to be seen if large rebar users, particularly large construction engineering and procurement (EPCs), shift towards imported material in view of high domestic prices or if local producers adjust prices to nip threats of import competition even though long product imports are a logistical challenge and generally not customizable at loading points,” he added.
However, a two market intermediaries and an official at eastern India’s largest rebar producer concurred that, while lower import protection would be a negative in the short term, the government increasing infrastructure spending by 34 percent through its National Infrastructure Pipeline (NIP) scheme would trigger a more robust and sustainable demand for construction grade steel products in the medium term and support secondary rebar producers to tide over short-term negatives and price corrections.
$1 = INR 73.00