Indian HR prices restart slide after firming up for 2 weeks

Indian domestic prices of HR coils peaked in August at around INR 50,000 per tonne, driven by international peak levels of USD 1200 per tonne in early July. Since than, the prices have crashed by about 40% in the domestic market and 67% globally to the levels of INR 27,000 per tonne and USD 440 respectively.

However, the impact of global decline in prices was less pronounced in India owing to following reasons:
1. Weakening of INR – 12%
2. Imposition of import duty – 5%
3. Reduction of Excise Duty – 4%
4. Inclusion in Restricted List

Rate in INR per tonne FOT
Exclusive of ED and VAT
(Source – www.steelprices-india.com)

Although Indian government did not lag in taking policy initiatives particularity re imposition of 5% custom duty, reduction in Excise Duty by 4% and inclusion of HR Coils in Restricted List to protect domestic price line, the Indian market is yet to shrug off sluggishness due inherent lack of demand owing to reduced economic activity.

Steel majors are making frenetic attempts to liquidate its stock by giving rebates on a case to case basis. Market sources have reported that steel majors have already commenced doling out quantity based rebate to solicit at least quarterly booking to replenish mills with orders to at least square off the variable cost in the short term.

In the last couple of weeks Indian market has undergone marginal correction of almost INR 1,500 per tonne. The market prices at Mumbai are as under

Rate in INR per tonne FOT
Exclusive of ED and VAT
(Source – www.steelprices-india.com)

On the other hand International prices FOB Black Sea have been static at USD 360 per tonne to USD 410 per tonne for Ukrainian origin and USD 390 per tonne to USD 440 per tonne for Russian origin for past one month. Although it must be mentioned that Chinese mills have increased their standard offer for HRC by USD 50 per tonne in last 15 days making them further unworkable

Thus the correction in Indian domestic prices seems to be characteristic bump owing to local factors rather than portending any definite revival, as all the steel majors are struggling to maintain volumes. In addition, it is quite likely that some of the Indian HRC producers may restart or ramp up their production due to this price spurt thus increasing availability form domestic sources. Lastly imports at USD 400 per tonne to USD 450 per tonne are likely to increase availability.

The upward swing in HRC prices has already halted on January 15th 2009 and the prices reduced by INR 400 per tonne to INR 27,191 per tonne.