India: Steel, raw material prices dip in April, coking coal sees steepest drop

Steel and raw material-related prices showed a downtrend in April, as per data maintained with SteelMint. Factors like the festive holidays, cheaper flats imports from Japan, a dismal exports scenario, and a liquidity crunch kept prices across the board under pressure in April. Coking coal saw the steepest m-o-m fall of 19%.

SteelMint goes behind the scene:

Coal

South African RB3 (4800 NAR): South African RB3 4800 NAR grade non-coking coal remained flat m-o-m in April 2023 at $110/tonne (t) CNF Gangavaram. The flatness has sustained for three months in a row.

Overall, trade was muted with sponge iron makers preferring to close deals for only small parcels in a slow market where demand for finished steel was low. Sponge iron prices also dropped 4% in April contributing further to the price dullness.

Moreover, natural gas prices on the benchmark Nymex platform dropped to $2.50 per metric million British thermal units (mmBtu) in April from $4.40 mmBtu in January amid unseasonably warm weather in Europe. This led to a drop in demand for South African coals, further pressuring prices.

Resultantly, indexed port-side ex-Gangavaram prices of the same also remained range-bound at INR 10,250/t (INR 10,300/t in March).

Australian Premium HCC coking coal: Average prices of the Australian Premium HCC declined 19% m-o-m in April 2023 to $290/t against $360/t in March. The downtrend was fuelled by ample spot supply. Demand from China was muted on the back of two factors -- limited offtake in finished steel and also a drop in domestic coking coal prices in that country. Although the spat with Australia is now resolved and procurement had revived, volume intake was low. Apart, demand from Indian buyers was also muted, again due to sluggish finished demand.

Non-coking coal (5000 GCV) ex-Bilaspur: South Eastern Coalfields (SECL), a Coal India subsidiary, conducted an e-auction for a record-high quantity of 2,755,000 t of coal on 19 April. Of the total offered quantity, 98% was booked at an average realisation of INR 2,448/t, garnering a premium of 122% over the notified price. But the bid premium has steadily fallen as compared to the previous SECL auctions. The premium was recorded at 164% in March while on 21 February, it was 251%, and on 7 February, 208%. Thus, with enough supply from Coal India, material in the reseller's market in Bilaspur went abegging even at a lower price.

Ferro alloys

Silico manganese 60:14: Prices of the bi-weekly 60:14 grade silico manganese index emerging out of Raipur upped a marginal 1% m-o-m to INR 74,750/t in April, 2023 against INR 74,100/t in March. Hike in domestic electricity tariffs continued to drive up silico manganese prices. Domestic demand as well as export inquiries were also limited. These two factors have kept prices range-bound since the last many months.

Scraps and metallics

These mainly showed a downward trend because of sluggish demand for finished steel especially in the secondary sector. Liquidity issues in the local markets, which spilled over into the new fiscal, also kept prices under pressure.

Pellet-based P-DRI: The pellet-based P-DRI, ex-Raipur, edged down 4% to INR 30,100/t in April, 2023, compared to INR 31,240/t in March amid the drop in pellet and scrap prices.

CDRI mix: Prices of CDRI with a mix of 70% lumps, 30% fines, FeM 80% (+/-1), ex-Rourkela dipped 2% m-o-m in April to INR 31,400/t (INR 31,940/t in March).

Steel grade pig iron: Pig iron prices, however, rose slightly by 4% m-o-m in this period to INR 42,740/t (INR 41,200/t in March).

Domestic melting scrap HMS 80:20 (ex-Mumbai): These remained flat at INR 38,200/t last month against INR 38,100/t in March. Prices were somewhat volatile if tracked on a daily basis, due to liquidity crunch and limited demand for finished steel in the secondary space. In fact, prices were slightly higher than that of imported scrap.

Imported melting scrap: Prices of shredded melting scrap of Europe origin, in containers, CNF Nhava Sheva dipped 2% in April to $460/t compared to $470/t in March. Turkiye, the global price-setter, has been staying away from the market. With the elections scheduled in May, Turkish rebar demand has dropped sharply, leading to a slowdown in scrap procurement. "The rebar demand turnaround expected from Turkey in April was elusive," remarked a source.

Globally, there has been a decline in demand for steel, which has further pressured imported scrap prices.

Iron ore

This raw material, in terms of fines remained flat while lumps and pellets showed a marginal drop.

Fines & lumps and pellets: Fe62% fines from Odisha remained unchanged at INR 5,680/t (INR 5,700/t) in April 2023 while the Fe63% lumps (Odisha) dipped 3% to INR 8,120/t (INR 8,400/t) m-o-m. Miners were not willing to lower offers as they wanted to wait for the OMC auctions to end from where they would have got some price clarity. However, the OMC auctions received a poor response with around 50% of the material getting booked. Still, miners adopted a wait-and-watch stance especially since enough material was not available in the market. Supply is expected to increase from May once the new environmental clearance (EC) limits take effect. Bulk of the auctions for fines and lumps were for low grade which received a fairly good response while prices of the higher grades remained steady.

The bi-weekly pellets (63%) index saw a drop of 5% to INR 9,380/t (INR 9,850/t) DAP Raipur. The reason can be traced to the fall in sponge prices. Plus, export deals were very scant in April, leading to squeezed realisations from such sales. This, in turn, impacted domestic pellet prices too.

Steel

This segment, comprising billets and finished products, saw prices move in a narrow range, with some dipping, others upping, impacted by lack of appetite for finished products.

Billets: The ex-Raipur billet index remained flat m-o-m at INR 46,270/t in April (INR 46,120/t in March) amid dull finished steel sales.

Rebar & wire rods: The ex-Mumbai BF-grade fell a further 3% to INR 59,450/t (INR 61,040/t) in the period under review. The IF grade lost 2% to touch INR 54,880/t (INR 55,930/t) while wire rods (ex-Durgapur), upped 2% to INR 51,160/t (INR 50,370/t) last month.

Longs demand remained poor as the projects segment waited for prices to fall further. Overall, the weakened raw material prices also failed to support finished items and billets.

HRC: Ex-Mumbai trade-level HRC prices dipped 1% to INR 59,940/t (INR 60,260/t). Two factors weighed on flats. One, imports from Japan cheaper than domestic are landing and a highly dull exports market where the Europeans have moved to the sidelines after some restocking. Two, global demand and prices are down and not offering Indian mills any bandwidth to raise prices.

Outlook

Iron ore prices in Odisha are expected to fall in the short term because NMDC has already announced a cut in its prices - by INR 300/t in lumps and INR 100/t in fines. But, the production cost of pellets remains high as fines prices have not dropped which may lend some support.

In finished, mills' list prices of rebar and HRCs may see a drop, keeping in mind the subdued demand scenario. "Sales are very tepid," confided a source.