India steel index rises after 16 weeks; longs see sudden price spurt

After 16 weeks of floundering in negative territory, the India Steel Composite Index at last slipped into positive zone in the week ending 4 August, 2023. W-o-w, the index rose 1% to close at 141.60 points. The previous week's closing had been at 140.30.

It was even more comforting for market participants that both the flat and long steel indices notched up some gains.

The India Long Steel Composite Index?upped a significant 1.64% to end the week at?136.20 points (134).

The India Flat Steel Composite Index was also up but a weaker 0.27% to 147.30 (146.90). But it may be noted, the flats index has been stable - creeping up ever-so-slightly - for three weeks in a row now.

Factors that influenced the index last week

Longs

Raw material cost push:?A key reason for the spurt in longs lay in the w-o-w increase in raw material prices. A tier-1 mill source indicated, raw material prices rose by an average INR 2,000/t in the week under review, pushing up induction furnaces' production costs.?"The longs segment was doing rather badly price-wise but since end-July, prices of raw materials, especially sponge iron, pellets and scrap, went up by almost INR 2,000/t. This pushed up the cost of production and raised longs prices,"?said the source. Since the IF mills command 65-70% of the longs market, an increase in their prices pushed up blast furnace route prices. Both got reflected on the index.

SteelMint's data reveals, the Pellet Index, DAP Raipur, rose w-o-w from INR 8,800/t to INR 9,050/t. Sponge iron prices, exw-Raipur, were up to INR 28,650/t against INR 27,200/t a week back. Melting scrap, end-cutting, DAP Ludhiana prices rose INR 1,500/t. Europe-origin imported HMS 80:20 rose $11/t in this period. Raw material prices upped amid their shortage, which is typical in the rainy season, when logistics challenges rear their head.

Projects take advantage of price fall:?Last month, prices hit rock-bottom which led some developers to do pre-booking to take the price benefit. Thus, rebar offers to projects ruled at INR 48,500-49,500/t, depending on the location, upping by INR 500-800/t. A source informed that further increase after 10 August expected.

Another source corroborated that tier-1 mills have been receiving healthy number of enquiries from projects, since prices had been sliding for many months now. "Project demand is good at present," said the source.

Flats

Tier-1 mills raise HRC-CRC list prices:?India's tier-1 mills raised list prices of hot rolled (HR) and cold rolled (CR) coils after a three-month gap. The subdued monsoon period allowed tier-1 mills to opt for maintenance downtime. This led to around 200,000 tonnes of material getting sucked out of the system, creating a shortage and allowed mills the leeway to raise HRC-CRC prices by INR 750-1,000/tonne ($9-12/t).

Further uptick in global prices:?There was a further uptick in global prices which supported the domestic price hike amid talks of Chinese production cuts and an ensuing supply disruption. Chinese imported HRC offers rose early in the week by $10-15/t. Vietnamese mills further raised their domestic offers by over $20/t.

Indian mills continue to hold-back HRC export offers:?A mixed scenario kept Indian export offers stable, which also lent support to domestic prices. The Middle East market slowed down further amid the hike in Chinese offers. Indian mills have not been offering to the Middle East and Vietnam markets. Europe too is quiet but mills raised offers to Nepal by $15-20/t, CFR Raxaul border, encouraged by a recent deal clinched at a higher price.

Outlook

Monsoons are historically a low month for rebar sales and thus mills are hoping this sudden bull-run in longs will sustain for some more time.

"There is a slowdown in the movement of goods no doubt because of the rains and unavailability of labour. But inherent demand is there from projects,"?said a source.

As a result, inventory at mills and also the trade level is low.

However, mills do not expect any major restocking to happen till September.?"Procurement should remain at current levels till September, post-which, demand is expected to pick up,"?said a source.

The India Steel Composite Index is assessed on a weekly basis,?every Friday at 18:30 IST, as per the weighted average prices based on manufacturing?capacity and production.

SteelMint?considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, SteelMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India.