India steel index inches down further for 11th week; are prices nearing bottom?

The India Steel Composite Index inched down further by 0.8% to 144.10 points (145.20 points last week) for the week ended 23 June, 2023. This is the 11th consecutive week of negative performance by the index.

As with the previous week, the longs segment impacted the mother index more. The India Long Steel Composite index lost a steeper 1.25% to close at 141.70 points (143.50), although this fall was lesser compared to the previous week.

The India Flat Steel Composite Index remained almost flat w-o-w at 146.50 points (147 points).

Factors influencing the index last week

Longs

Both EAF/IF rebar prices remain under pressure, impelled by a few factors.

Increased rebar supplies: India's rebar production increased by 24% m-o-m in May, 2023 to nearly 4 million tonnes (mnt) as per data from the Joint Plant Committee (JPC). This was also a 19% increase y-o-y. Heightened supplies in the face of dull demand weighed on prices across both blast furnace and induction furnace materials. In fact, rebars from both segments have been on a losing streak for some time.

Last week, trade-level BF-route (ex-Mumbai) prices declined by INR 600/tonne ($7/t) w-o-w to close at INR 52,900/t ($645/t). Induction furnace rebars dropped by INR 600/t (ex-Raipur) and INR 500/t ($6/t) ex-Mumbai to close at INR 49,700/t ($606/t) and INR 50,300/t ($613/t) respectively.

Traders in destocking mode: Traders were heard to have entered destocking mode amid dull and need-based buying. They were keen to maintain inventory at a minimum level, it was learnt. The volatility in billet prices also dissuaded buyers from entering the market.

Project offers fall further: Offers to the project segment fell further by INR 1,000/t ($12/t) to touch INR 51,500-52,000/t ($628-/634t). Projects continued to do need-based procurement with the advancing monsoon. Overall, buyers stayed on the sidelines, expecting prices to erode further.

Fall in raw material prices: Raw material prices were also not supportive. The Australian premium hard coking coal remained range-bound at around $230/t. However, SteelMint's Odisha iron ore fines index for Fe63% showed a w-o-w drop of INR 300/t ($4/t) to INR 5,500/t ($67/t) ex-mines, as on 17 June. Scrap prices, both locally and globally, have fallen.

Imported shredded and HMS (80:20) melting scrap from Europe CNF Nhava Sheva declined by around $10/t w-o-w to $425/t and $410/t respectively.

Flats

Dull domestic and global outlook kept flats in a narrow range

Domestic HRC prices range-bound: Domestic trade-level hot rolled and cold rolled prices remained unchanged w-o-w. HRC prices stood at INR 55,000-56,000/t ($671-683/t) while CRCs hovered at INR 59,000-60,000/t ($719-731/t).

It seems the upcoming festivals of Eid over 28 June-1 July, and the Chinese Dragon Boat Festival celebrated over 22-24 June, slowed down the overseas market which had a spillover effect on domestic demand.

No fresh HRC import bookings heard: Vietnamese mills are sold out for August allocations and do not have much material to offer at present, while Chinese offers have firmed up, making these less attractive to the Indian buyers. There have been no offers from Japan for India. Hence, Indian mills can breathe easy that there are no new HRC import bookings heard of at present, which helped to at least keep domestic prices range-bound.

India HRC export prices stable: SteelMint's export index remained stable w-o-w at $565/t amid mixed signals from the global markets. For instance, offers to the European Union (EU) have edged up on the back of a stronger Euro. Vietnamese mills firmed up their export offers as domestic mills were sold out. Vietnamese export prices remained supported in a recent deal to the EU. However, upcoming holidays in the Middle East kept the market here slow while Chinese domestic demand has also slowed down due to festive seasons.

Outlook

The Indian market is giving out mixed signals. Buyers are awaiting the primary mills announcement for next month. Industry officials say prices have bottomed out and will not fall from here.

Overall, higher production, falling exports have resulted in inventory build-up with mills but they feel demand is likely to rebound next month which will resolve this issue.

HRC distributors claim low inventories in the retail segment due to some buying in the last two months. However, arrival of previously-booked imported cargoes may create some pressure on them.