India's steel index touches 8-month high but remains range-bound

The India Steel Composite Index inched up w-o-w to touch an eight-month high. The last time similar levels were observed on 1 July, 2022. In actual terms, however, for the week ending 3 March, 2023 the index remained stable, up a negligible 0.4% to 157.1 points (156.50 points in the previous week).

The other two sub-indices also remained range-bound. The India Flat Steel Composite Index upped a marginal 0.80% to 157.90 (156.60) while the India Long Steel dipped a mild 0.10% to 156.30 (156.40) points w-o-w.

Factors keeping the index stable

1. Flats get export support

a.) Mills raise prices: Flats are marginally up because mills raised HRC-CRC list prices by INR 2,000/t for early March sales. On cue, trade-level prices of HRCs also increased by INR 1,400/t and CRCs by INR 800/t. Decent exports and domestic demand encouraged mills to raise prices, which gave the trade segment the green signal to follow suit.

b.) Exports stable, mills not under pressure: In flats, Vietnam could be opening up for hot rolled coils (HRCs) as Chinese offers to this Southeast Asian HRC-hungry country have risen from $658/t CFR to $690-695/t in the span of a fortnight.

However, demand from the UAE has moderated as buyers are seeking cheaper alternatives. But Indian mills are not under pressure to reduce their offers and can still pick and choose their markets.

Meanwhile, the European market has cooled down after a decent bout of restocking.

c.) Adequate domestic demand: With summer setting in, demand for consumer durables like refrigerators and air-conditioners will likely rise 20-25% this year, which may translate into higher flat products sales. Automotive will continue to support flats while housing, fabrication and roofing will have enough pull ahead of the monsoons.

d.) Cost push from raw materials: Raw material prices have continued to rise m-o-m and the trend is persisting in March so far, especially in iron ore and coking coal - mainly required by the primary mills. Fe63% fines from Odisha rose to INR 6,000/t from INR 5,875/t a week back. The Fe63% lumps (Odisha) upped w-o-w to INR 7,400/t against INR 7,100/t. Average prices of the Australian low-vol HCC rose 15% m-o-m in February 2023 to $380/t against $330/t in January and is reigning even higher currently.

2. Longs pin hopes on Turkiye

a.) Project segment stocked up: Longs remained range-bound because mills rolled over prices for early March sales as demand ebbed following closure of project segment demand.

b.) Turkiye in focus as billet, rebar enquiries rise: All eyes are now on Turkiye, which is sending out feelers for importing billets and rebar. In fact, Turkiye is actively buying billets from Southeast Asia and the Middle East, SteelMint understands. Turkiye has also bought large volumes of scrap in the last few days, which has raised scrap prices to 8-month highs amid escalated demand for rebars.

Indian mills too are receiving enquiries from Turkiye, it was heard.

c.) Metallics exports gaining traction: SteelMint heard of export bookings of over 60,000 tonnes of pig iron. Around 40,000 tonnes were contracted to Turkiye for March-April 2023 shipment at a tentative price idea of $525/t CFR. Another major seller concluded two export shipments of possibly 20,000 t last week at around $485-495/t FOB, perhaps to the SE Asia, although the destination could not be confirmed. Further pig iron enquiries are under way, it was heard.

Outlook

The market will stay muted in the immediate short term on account of the Holi festivities.

However, thereafter, Turkiye's reconstruction demand may offers some support to longs as well as metallics (for making billets) while flats are bracing for decent summer domestic pull.