Indian rebar prices in the local market have continued to seek lower levels over the past week with spreads between base prices of integrated steel mill and tradable prices narrowing further in the face of weakening demand in both the large construction industry as well as retail sales to real estate developers, SteelOrbis learned from trade and industry circles on Tuesday, July 13.
Following price cuts announced by integrated steel mills earlier in the month, base prices have been maintained at INR 53,500-54,000/mt ($717-724/mt) ex-works with the spread with tradable prices narrowing to almost zero. The tradable level is at around INR 54,000/mt ($724/mt) ex-Mumbai, down by INR 1,000/mt ($13/mt) over the past week.
According to trading sources and officials in large construction companies, the pace of implementation of infrastructure projects, accounting for bulk bookings of integrated steel mills, is progressively slowing down in the face of adverse weather conditions in large parts of the country and is expected to continue through the next one month.
Secondary steel mills have maintained base prices at around INR 51,000-52,000/mt ($684-697/mt) ex-works, but retail sales have been heard at discounts of two to three percent particularly in eastern regional markets, where the monsoon season has forced housing developers to slow down the pace of construction, triggering inventory build-ups at the retail sales points of secondary mills.
However, both producers and consumers have maintained divergent short-term outlooks.
“The weak demand and prices are very much seasonal. It happens every year. The impact of the second wave of the pandemic has been limited as restrictions were more regional. We expect the construction and housing sectors to bounce back as the government is providing support to these employment-intensive industries,” an official at Shyam Steel, eastern India’s largest rebar producer, said.
“Of course, the rebar industry will have to increase efficiencies of distribution through higher levels of digitization as threats of the next wave of the pandemic are still real. Higher digitization will enable both sellers and buyers to maintain economic activity levels,” he added.
But real estate developers as represented by the Confederation of Real Estate Developers’ Association of India (CREDAI) maintains a more pessimistic outlook on the grounds that, unless rebar prices undergo a strong correction, the cost-push would depress demand in the housing sector.
An official at CREDAI said that a INR 1,000-2,000/mt rise in rebar prices translated to a cost escalation of around INR 1 million in the case of a housing unit in the affordable segment, and consumers having lost a lot of savings on healthcare costs, it is difficult for the housing market to absorb such a higher cost escalation. He said that a rebar price correction needs to see a bottom below INR 50,000/mt ($670/mt) or a pre-pandemic level to ensure any kind of demand uptick in retail sales.
$1 = INR 74.58