HRC price revision accelerates steel nosedive

Abhishek Law | Updated on: Jul 05, 2022
3d rendering roll of steel sheet in factory

3d rendering roll of steel sheet in factory | Photo Credit: PhonlamaiPhoto

Prices now down 25 per cent from the peak they were commanding earlier this year

Domestic steel prices saw a ₹3,000-5,000 per tonne decline, month-on-month, with primary steelmakers announcing a revision of the flagship hot-rolled coil (HRC) prices. The revision was made for early to mid-July deliveries.

Most of the major mills (which include private players and PSU majors) have announced a price band (for HRC) between ₹61,000 per tonne and ₹62,000 per tonne, cold rolled coil prices are in the ₹68,000-70,000 per tonne range; while rebar prices are in the ₹59,000-60,000 per tonne range.

Steel prices have now corrected 4-8 per cent on a month-on-month basis (July versus June); while they are down by 25 per cent from the peak that they were commanding earlier this year. Weakened demand including seasonal fluctuation and a focus on clearing excess stocks — following slow export orders — ahead of monsoons are seen as prime reasons for the drop.

Tata Steel, while giving out provisional production and delivery numbers for April to June period, said, deliveries were at 4.06 million tonne, lower by 2 per cent y-o-y, due to moderation in exports following the imposition of 15 per cent export duty. However, the company said domestic deliveries were ramped up leveraging the strong marketing network and increased by 5 per cent y-o-y.

Spot steel prices, ex-Mumbai are at around ₹60,100 per tonne, down 6 per cent, from the ₹63,700 per tonne it was commanding in early June.

Price bottoming out

According to Ranjan Dhar, Chief Marketing Officer, AM/NS India, mills have sharply revised prices downwards in May and June and now “it’s the bottom”.

“July is basically a rollover of June exit numbers. We don’t see any further reduction possible now as mills have already cut a lot of production by preponing maintenance shutdowns, correcting the inventory overhang,” he told BusinessLine.

Dhar added, cost of production continue to remain elevated and there are hardly any EBITDA margins for domestic mills at current price levels. “Mills might have to look at price increases at an appropriate time to cover costs,” he said.

Slowing demand

Steel demand has been slowing down and it also has an impact with iron-ore prices cooling down. Iron ore is one of the primary steelmaking raw materials. Iron-ore auctions, too, have been receiving weak responses over the last few weeks.

State-run iron ore miner NMDC saw sales nosedive by 40 per cent in June to 1.9 million tonnes (mt); from 3.18 mt in the year ago-period. For Q1 FY23 (April to June), NMDC reported a 20 per cent y-o-y decline in sales to 7.66 mt (9.57 mt), despite reducing prices by up to 36 per cent between April 1 and June 5.

One-on-one negotiations

According to buyers, some of the mills are also open to one-on-one negotiations too and there could be some price variations. Domestic demand for construction steel (long steel, plates, galvanised, etc) is down because of the monsoons and pre-monsoon buying has been completed. Thus sales of such material will drop too.

According to a SteelMint report, mills are also eyeing parity with import prices. And the July domestic prices are in parity with Japan and Korean landed import offers.

Published on July 05, 2022
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