Will Indian Mills Increase Flat Steel Prices for June ?

In the recent conversation with industry participants, SteelMint got indications that major Indian steel mills may hike flat steel prices in June owing to increased production cost. Although the quantum of hike has not been finalized yet but the anticipation is around INR 500-750/MT.

However dull automotive demand and limited deals in trade segment remain matter of concern for absorbing this price hike.

Which all factors have led to hike in production cost ?

1. Hike in domestic iron ore prices- Odisha based major merchant miners like Rungta Mines, Serajuddin, KJS make 2nd price hike in iron ore in a month's time. In 2nd hike made, lump offers up by INR 300/MT and fines by INR 200/MT.

Meanwhile NMDC has announced an increase of INR 250/MT from its Chhattisgarh mines and in floor prices for upcoming Karnataka e-auctions by around INR 250/MT.

2. Global iron ore prices at 5-years high - The price hike in domestic is attributed to increase in global iron ore price, which are hovering around five years high. Spot iron ore fines Fe 62% index has picked up to USD 108/MT, CFR China yesterday, up by 8% W-o-W. Also price of other raw material - pellet has increased sharply on export bookings and is hovering at 3-month high in eastern and central India.

3. Higher coking coal prices - Seaborne coking coal (Premium HCC) prices went up to USD 210/MT FoB Australia in the beginning of May’19 which was at USD 201/MT in beginning of Apr'19. However last week prices witnessed decline and stood at USD 205/MT FoB basis.

Manufacturer of major steel mill shared that, ”Announcement on price revision is still awaited.However if cost of production increases then Indian steel mills may consider price hike in the month of June in order to recover the cost”.

Downstream segment demand continues to remain dull - Domestic HRC & CRC prices continued to remain under pressure in traders market over sluggish demand since last two months amid General Assembly Elections. If market sources to be believed hike in flat steel prices will be difficult to absorb in domestic market due to poor sales in auto sector and stalled infrastructure projects over delayed funding.Also approaching monsoon season may lead to slowdown in buying activities in domestic market.

Falling prices in export bookings - Furthermore, fewer export bookings amid weakening global HRC offers and cheaper HRC imports arriving to India will weigh on HRC prices in domestic market. HRC offers for export to Vietnam have come down by USD 30/MT on monthly basis.

Domestic HRC prices witnessed decline by INR 1000/MT in May against previous month in traders market over subdued demand. Currently HRC (2.5-8mm, IS2062) prices in traders market is around INR 41,000-41,500/MT (ex-Mumbai), INR 40,700-40,800/MT (ex-Delhi). Prices mentioned above are basic and extra GST@ 18% will be applicable.

Currently CRC (0.9mm,IS 513) in traders market is around INR 45,500-46,000/MT(ex-Mumbai), INR 45,500/MT (ex-Delhi).Prices mentioned above are basic and extra GST@ 18% will be applicable.