Primary Finished Steel Notice Substantial Price Correction in Early July

At the beginning of July month, there has been a notable decline in the spot prices of primary Finished Steel. Despite this, major mills have managed to maintain stable prices in comparison to the offers they made in the final week of June. The trade prices for Flat Products and TMT have decreased by approximately Rs. 1,000-1,500/ton w-o-w. However, when considering the month-on-month comparison, there has been a substantial nationwide plunge of Rs. 3,000-4,000/ton.

Price Overview

1. The Revised Effective Prices for TMT (12-32mm, IS1786) are as Follows:

• Ex-plant prices in Raigarh and Angul: Rs 48,500/ton
• Prices in Bellary and Dolvi: Approximately Rs 50,000/ton
• Vishakhapatnam Steel Plant (ex-plant Vizag basis): Rs 49,500-50,000/ton
• SAIL Bhilai Steel Plant (ex-plant basis): Nearly Rs 48,500-49,000/ton
• SAIL Durgapur plant (ex-plant basis): About Rs 48,000-48,500/ton

2. The Flat Steel Offers are as Follows:

• HRC prices (SAIL and TATA) in NCR regions, including Delhi: Around Rs 56,000-56,500/ton
• The revised effective prices for TMT (12-32mm, IS1786) steel are as follows: Approximately Rs 60,500-61,000/ton
• The above prices are ex-works and exclude GST at 18%.

Reasons Behind Declining Prices

1. Slight Fall in Raw Material Prices

Steel prices experienced a decline due to lower base raw material prices, with Iron Ore dropping by Rs. 100-450/ton in June. This drop was influenced by weak global trends, particularly in China, a major Steel producer. The slight decrease in coking coal prices also contributed to sluggish market conditions both domestically and globally. As a result, reduced Steel demand led to price reductions in the industry.

2. Downtrend in Housing Demand

The underperformance of the housing sector in major cities has had a direct impact on Finished Steel sales. Reports highlight a 1-2% decline in property sales, both on a year-on-year and month-on-month basis in June 2023, particularly in western markets. Given that construction and infrastructure sectors account for 60-70% of total Steel demand in India, the sluggish sales in these areas have significantly affected the domestic Steel market.

3. Limited Exports

Due to the decrease in prices in the global markets, the pace of Indian Steel exports experienced a significant slowdown during May and June. As a result, Steel mills had to redirect their focus towards selling their products domestically. This shift in strategy led to an oversupply of Steel in the domestic market, creating a situation where supply outstripped demand. Consequently, this imbalance exerted pressure on Steel prices.

4. Narrowed Down Price Gap Between Primary and Secondary Mills

During June, there were price corrections observed in both secondary and primary mills. Secondary mills experienced a moderate decrease in prices, ranging from Rs. 2,000-3,000/ton, while primary mills faced a more pronounced decline of around Rs. 3,000-4,000/ton. Consequently, the price gap between primary and secondary mills narrowed down. In response to this, primary mills had to lower their prices in order to stimulate purchasing. This adjustment was necessary as a significant portion of the market demand is fulfilled by secondary mills.

OFB’s Insight

In July, primary mills in India witnessed a modest drop in Finished Steel prices due to lower raw material costs, narrower price difference with secondary mills, and reduced housing demand. The future evolution of market dynamics and demand patterns will determine the continuity or alteration of these price trends in the upcoming months.