India's secondary steel producers, trade see decline as China price falls

Motilal Oswal says demand for long steel has moderated, possibly weighed by weakened construction activity

As steel prices fall in China, the Indian market is weakning even though primary producers have not reduced mill prices.

According to data from SteelMint, week-on-week, prices of hot rolled coil (HRC)--a benchmark for flat steel--showed some softening in the trade segment for markets like Delhi, Faridabad, Ahmedabad, Chennai and Kolkata.

Prices of HRC for the week ending January 17 in Delhi were at Rs 58,250 a tonne, Faridabad Rs 57,250 a tonne and Kolkata Rs 55,250 a tonne; for the week ending January 24, prices for the markets stood at Rs 56,500 a tonne, Rs 55,750 a tonne and Rs 54,500 a tonne, respectively.

In long products, secondary producers have reduced prices by about Rs 3,000 a tonne. “The price cut has been done by secondary producers only and this is the first time in the last three months. But this may be temporary, as raw material prices have not corrected,” said a secondary producer.

 

A primary producer said the softening is due to the Chinese New Year. “The market is still strong,” the producer said.

“In China, prices have dropped by about $60 a tonne since last month. It is normal for the market to slow down ahead of the Chinese new year,” said Jayanta Roy, senior vice president at ICRA.

“One will have to see how things pan out after the holiday season. In India, the trade segment has seen some moderation, but it’s still too early to say whether this is temporary,” he said.

China’s steel trade was seeing some normalization. A Motilal Oswal report recently said that China’s monthly steel exports rose--for the first time after seven months of decline--by 4 per cent Y-o-Y (and 10 per cent M-o-M) to 4.85 million tonne in December 2020, as traders took advantage of strong prices in the export market.

China’s steel imports have also normalised, declining for the first time in 10 months by 7 per cent Y-o-Y (-25 per cent M-o-M) to 1.37million tonne in Dec’20, the report further mentioned.

China had imported large quantities of semis as the economy recovered sharply with government infrastructure stimulus after the Covid-19 pandemic.

 

Motilal Oswal said that it believed the demand for long steel had moderated, possibly weighed by weakened construction activity due to weather conditions and the resurgence of Covid-19 cases in parts of the country.

Buoyed by international rally in steel prices, domestic HRC prices surged to an all-time high of about Rs 58,000 a tonne in the first week of January 2021, a 60 per cent increase from the levels prevailing end-June 2020.

This had led user and input industries to voice concerns. EEPC India chairman, Mahesh Desai, said, “There is a sluggishness in the market and this is a natural consequence of month-to-month increase in steel prices.”

Some analysts said that ahead of the Union budget some users could be putting off purchases. “Also, when international prices are falling, people want to wait and watch,” they said.

A primary steel producer, however said, that there was likely to be another round of increase after the budget.