Indian steel mills are eyeing price hikes in January on the back of improved global cues and firming up of international prices. Domestic orders continue to be on the slower side though.
In a first indication, flat-coated offerings — worst hit by rising imports and price fluctuations — have seen some upward price movements by ₹500 per tonne. At least two large mills announced price increases earlier this week, sources said.
Prices down in December
Steel mills had reduced prices of the benchmark hot-rolled coils (HRC) by around 5 per cent m-o-m for deliveries in December. Prices are at around ₹53,400/tonne (ex-Mumbai). A month ago, domestic HRC price was around ₹56,000/tonne. Prices of cold-rolled coils (CRC), on the other hand, saw an over 5 per cent fall m-o-m to ₹59,300/tonne, down from ₹62,500 per tonne.
Multiple reasons have been cited for the reduction in prices. Firstly, the Centre rolled back its export duty mid-November, but orders from the overseas markets were yet to pick up substantially. At the same time, the domestic demand continued to be significantly depressed, at least till mid-December.
Moreover, since imported steel prices were somewhat lower than domestic prices — around ₹5,000/tonne lesser — in the beginning of December, mills thought it was necessary to bring down prices further and compete with imports.
“There was pressure on domestic mills, especially with imports coming in. Moreover, trade channels which had higher-priced stock did not liquidate them at lower prices. Now mills have excess stock. So keeping in view these issues, around 5-odd per cent reduction was made,” official of a major steelmaker told businessline.
Incidentally, India’s finished steel production dropped 5 per cent in November to 9.5 million tonnes (mt) as against 9.9 mt in October. Variation in stock went up to 149,000 tonnes, up 40 per cent m-o-m, a report by the Steel Ministry shows. Variation in stock is the difference between opening and closing stock. Increasing variation indicates mills are unable to liquidate offerings quickly because of slowing demand and have larger stock with them.
Changing global cues
Trade sources say international prices are witnessing some firming up in the later half of December. For instance, export prices from China have firmed up at $625 per tonne (as against $600 per tonne or so); while Indian mills have floated offers for export at $596-600 per tonne range (as against $540-$550 per tonne range).
The difference between domestic trade-level and imported HRC prices is reducing. On a monthly average basis, the landed cost of imports was at a discount of ₹5,500 per tonne in August as against the domestic HRC trade prices. This gap peaked to ₹10,000 per tonne in November which led to increased import bookings, Steelmint said in a recent report.
Indian mills have withdrawn offers this week and will come up with fresh offers in early January. This has lent some support to domestic market sentiments too, the report added. “This means prices in the domestic market could increase January onwards,” said the official adding that domestic consumption is expected to increase in the coming days on the back of increased push towards infra-projects and pick up in construction activities.
Research firm ICRA, in their year-end report, said domestic finished steel demand registered a double-digit growth of 11.9 per cent in the first eight months of FY23. “However, given the expectation of a slowdown... domestic steel demand growth is likely to moderate to 6-7 per cent in FY24,” it added.