Pressures from unsold stocks have continued to mount in the Indian rebar market with both large as well as small and medium-scale producers forced to drastically lower prices in an attempt to push volumes even though demand from key consuming sector continues to plummet, traders said on Tuesday, September 3.
The traders said, even with prices at a two-year low, producers have been forced to lower prices further. While large steel mills are comparatively better equipped to withstand the downturn than small producers, they are being forced to slash prices indicating the deepening of the demand depression across consuming sectors.
Market sources said that small and medium-scale manufacturers have lowered prices by INR 500/mt ($7/mt) week on week to INR 32,200/mt ($450/mt) ex-stockyard. Moreover, during the past week large steel mills have cut prices by INR 1000/mt ($14/mt) to INR 32,000/mt ($447/mt) ex-stockyard.
“The crisis in the market is indicated by the reversal of pricing trends between small and medium-scale producers on the one hand and the large steel mills which generally price their rebar higher. This clearly indicates that B2B sales and procurement from government projects, which account for large-volume sales of big steel mills are also drying up,” an official from Shyam Steel, the largest eastern India-based rebar producer said.
“It’s a perfect storm in the market. Real estate developers are facing an acute fund crunch from financial lending institutions, forcing them to delay ongoing project implementation and stay away from new projects. Government procurement also does not shows signs of increasing with the government not committing large public funding. Retail sales are in a slump owing to monsoon rains and individual projects being postponed,” the producer added.
According to two traders, large mills have been attempting to push higher volumes overseas even with offers ensuring minimal margins on FOB basis, to reduce inventory-carrying costs and are expecting nominal export earnings in dollars to be compensated for by higher local currency earnings if the rupee breaches the INR 72 to the dollar mark from current levels of INR 71.58 to the dollar.
Market sources said that at least two mills have been able to conclude contracts for end-September shipment to Singapore at offers ranging $465-470/mt CFR, which the sources added would ensure minimum margin earnings on FOB basis. However, demand has stayed slow.