Under compulsions of absence of Chinese buyers and slowdown in merchant sales to secondary steel mills, Indian integrated steel mills have been under fresh pressure and they will have to cut prices to keep pushing volumes in Southeast Asian to manage inventories, SteelOrbis learned from trade and industry circles on Wednesday, June 23.
Chinese buyers had largely deserted the Indian market in face of problems of ship movements between India and China and reports of letter declining entry of vessels visiting Indian ports. The sources said that there have been a number of reports of June deliveries defaulting in face of such issues and freight rates from Indian east coast ports to China rising to levels of $60-80/mt, compared to usual freight rates averaging around $30-40/mt.
At least two market intermediaries confirmed that cargoes originally sold to China last month had been diverted to alternative Southeast Asian buyers.
“High freight costs and uncertainty whether India originating vessels would be allowed entry into Chinese ports has almost killed exports. At $75-80/mt freight charges, neither seller nor buyer would have a positive margin,” an official with a government steel mill said. Exporters have no option but to divert cargoes to alternative buyers at lower price as unsold volumes getting added to inventories is not viable,” he added.
Ex-India billet price has come down to $600-610/mt FOB, down by $10/mt on average over the week. The trading has been active over the past week, at slightly higher prices (mainly at $610/mt FOB and above), but in the middle of this week, bids from Southeast Asia have fallen and in next tenders Indian mills are unlikely to get prices above $600/mt FOB, sources believe.
As SteelOrbis reported earlier this week, a southern India based government steel mill concluded an export tender for 18,000 mt at price of around $612/mt FOB late last week, which sources said that at least $10-15/mt below the target price set by the exporter. A part of this material has already found its buyer in the Philippines at the price of about $695-698/mt CFR. At the moment, most offers to the Philippines have declined to $690/mt CFR and buyers are bidding at $680-685/mt CFR only.
Moreover, one deal for 30,000 mt of 150 mm billet from the major Vietnamese producer has already been sold to the Philippines at $680/mt CFR this week, signalling about the weakening of the market.
Another deal for ex-India billet was heard with a Taiwan buyer at a price of around $690/mt on CFR last week, which would translate to some $610/mt FOB excluding freight and some additional expenses.
A West Bengal based steel mill reported a trade for an estimated tonnage of 15,000 mt with buyers in Indonesia at price of up to $620/mt FOB for wire rod billet, the sources said.
Meanwhile integrated steel mills maintained merchant sale price of billets in the local market at INR 40,500-41,500/mt ($545-559/mt) ex-work even in face of negligible bookings by secondary mills unsure of price direction of rebar.
$1= INR 74.30