The momentum of steel prices moving northward has not weakened, and the price of benchmark hot rolled coil (HRC) products has reached a record high of 58,000 rupees per ton (except Mumbai). This is due to short supply in the construction, automotive and white goods sectors.
“Domestic hot rolled coil prices have further increased by Rs 2,750/ton from the previous week. This is because major producers have adjusted their ex-factory prices through wholesale prices. As a result, steel distributors have also increased prices to maintain profits.” Brokerage firm Edelweiss Said in a report on January 6.
SteelMint said that as of January 1, 2021, the price of 2.5-8mm hot rolled coils in the Mumbai wholesale market was 55,250 rupees per ton; since the price increase on January 5, the wholesale price rose to 58,000 rupees per ton. Jayanta Roy of Icra, a rating agency, said that the domestic market for hot rolled coil prices has never risen. He said: “This is unprecedented.”
On January 1, 2020, the price of hot rolled coil of the same grade in the Mumbai wholesale market was 37,500 rupees per ton. The current price is 55% higher.
“At the current level, domestic prices are 6% higher than imported prices from South Korea, but we don’t think imports will pose a threat, because the delivery date is already in the second quarter. In other words, if China’s export prices continue to maintain Weakness, price momentum may stop.” Edelweiss said.
Credit Suisse also predicts that due to the rebound in demand, steel shortages and sharp increases in costs, steel prices will remain high.
The supply constraints in the domestic market are due to the dual effects of slower production by secondary producers and limited imports. The combination of the two also reduced the steel mill’s inventory to 10.6 tons in December, a 21% year-on-year decrease.
Tier 2 steel producers (mainly due to lack of raw materials) produce much less. In December last year, their share of domestic production was only 36%, compared to the normal average of about 42%. Credit Suisse said that as final demand picks up, secondary steel producers are expected to increase capacity utilization.
Domestic steelmakers have been facing challenges from different regions, including MSME and Road Transport and Highway Minister Nitin Gadakri, who have increased their prices in the past few months. When Gadkari wrote to the Prime Minister seeking the highest level of intervention to curb price increases, the Indian Iron and Steel Institute (ISA), as the representative body of domestic steel producers, recently attributed the price increase to The severe shortage of iron ore caused its price to rise sharply, and the price of steel in the international market moved northward. Indian prices expressed “sympathy” for this and weakened domestic steel production.
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Post time: Jan-11-2021