Domestic flat steel prices in India jumped by Rs3,500-4,000/mt ($48-54/mt) in April from March on strong global cues for HRC. Prices have jumped by over 38-42pc from the prior year.
JSW steel announced a price hike of Rs4,000/mt ($54/mt) for flat steel on higher international steel prices and a rise in raw material prices. The steelmaker has also raised long steel, rebar prices by Rs3,000/mt for April deliveries.
Driven by high global prices for finished flat products as well as a rise in raw materials like iron ore and coal, Indian HRC prices are expected to remain elevated in the coming months. Also, production cuts in Tangshan, China is expected to offer more export opportunities for Indian primary flat steelmakers in the near term.
Export prices jump
In the export market, demand for Indian HRC picked up sharply. Indian HRC export offers rose by $30-50/mt in the last two weeks. While there was a gap of Rs5,000/mt between local prices in Asian markets versus imports on a landed cost basis, according to a report by Nomura. For shorter transit times and price competitiveness, Southeast Asian buyers opted for Indian bookings over Russia, CIS and China.
In the domestic market, HRC prices are at Rs60,000-61,000/mt ($818-830/mt) ex-works Mumbai reaching the highest since 2008 while at Rs59,000-60,000/mt ($804-818/mt) ex-works Durgapur.
Major auto manufacturers in India hiked prices for all vehicles in the range of 1-3pc in April with a 3-5pc price hike so far this year, according to Care ratings. Most of the price hike was to offset the impact of higher steel cost. Leading manufacturers in the passenger vehicle & two-wheeler segments Maruti Suzuki & Hero MotoCorp have already announced price increases April 1. Toyota, Renault and Nissan Motors are expected to follow the suit.
Chinese export tax rebates
Along with production curbs in Tangshan, lowering VAT rebates on exports from China would push global prices even higher. The Chinese government pledged to reduce crude steel production by around 22mn mt in 2021 and strict measures are likely to stay in place as a reduction in peak emissions by 2025 is high on authorities’ agenda.
Flat steel producers are, however, facing lower-than-expected demand domestically due to the second wave of COVID-19 and stricter restrictions hurting retail sales. Higher steel prices, which is an increase in input cost for downstream manufacturers, over a longer duration could spike inflation and have a negative impact on consumption by end-users.