Steel sees headwinds in rising stocks: India Ratings

Domestic hot-rolled coil (HRC) prices have corrected by 3 percent in mid-February to ₹53,750 a ton due to rising inventories with traders who are reluctant to procure steel at the high price levels since they have sufficient inventories, a slight moderation in demand from auto and pipe makers and a disparity between the mill price and trade price, a report by India Ratings has said.

Current prices are still 40 percent higher on year though.

The recent import duty reduction on steel scrap shall benefit secondary steel producers and the temporary suspension of countervailing and anti-dumping duties should bring about some stability to steel prices and supply, the rating agency believes.

“Domestic rebar prices have also corrected due to the reduction in iron ore prices and increasing production by secondary steel producers,” India Ratings said.

Domestic rebar prices in mid-February were at ₹48,800 a ton, 9 percent lower on month but 38 percent higher on year.

Furthermore, the recent budget announcements reducing the import duty on steel scrap shall encourage secondary steel producers to now increase the output since reliance on the current high cost iron ore has reduced. This would help improve rebar supply and put pressure on steel prices.

Chinese HRC prices rose 3 percent on month but were higher 34 percent on year in mid-February.

Spreads

HRC spreads have corrected by ₹3,050 in mid-February when compared to end December’s around ₹40,250. However, the spreads are still at elevated levels and are around 60 percent higher on year.

The correction in spreads can be attributed to the reduction in flat steel prices.

The elevated level of steel spreads is likely to continue over 4QFY21.

Domestic rebar spreads have also corrected due to the fall in rebar prices, but are still at elevated levels. Rebar spreads in mid-February were at ₹32,230/t, around ₹3,200 lower on month.

Iron ore