The local Indian rebar market has started to show tentative signs of firming up in anticipation a demand revival during the festival season ahead, even though export activity has remained limited, traders said on Tuesday.
According to the traders, the festival season coupled with the government directing banks to step up lending to retail borrowers is expected to improve the liquidity availability in the market, which in turn could spur demand for individual construction activity. This has been reflected in the comparatively higher price increase by rebar producers in small and medium-scale sectors which are more dependent on retail sales, the traders said.
Rebar prices of large steel mills have increased by INR 750/mt ($11/mt) to INR 32,750/mt ($455/mt) ex-stockyard but there are reports of volume discounts ranging around INR 400/mt ($5.50/mt) persisting during the past week as earlier in the month.
Rebar producers in the small and medium-scale sectors have pushed up their rebar prices by INR 1,000/mt ($14/mt) during the past week to INR 33,200/mt ($461/mt) ex-stockyard, although at least two traders said that the price increase was more due to improved sentiments and expectations of rising demand during the festival season from retail sales, even though an improvement in trading volumes in the market has yet to emerge definitively.
“The government directive to banks to go ahead with mass sanctioning of retail loans ahead of the festival season next month will definitely put more money in the pockets of customers. This might help improve retail sales of rebar and renewed activity in the housing sector,” an official with an eastern region-based long product manufacturer said.
“However, it’s all about sentiments in the market riding on expectations. Only an increase in trading volumes in the market will enable conditions to stabilize and help higher price levels to consolidate. For large producers, the signs of a turnaround are still very tentative. Government off-take is still very low. Large mills are also facing issues in getting payments cleared for supplies already completed to government-funded projects,” the official added.
Competition is still very fierce from secondary steel producers in the unorganized sector which have been offering rebar at sub-INR 30,000/mt ($417/mt). Though this low-price rebar is of low quality and often falls short of the specifications of the Bureau of Indian Standards (BIS), cash strapped and price conscious retail buyers could still be attracted to these materials at the expense of organized rebar producers from integrated steel mills, the two traders said.