Liquidity crunch pressures Indian coated steel prices

India's coated steel prices dropped further this week, as consumption remained minimal with buyers delaying payments because of a lack of funds.

Consumers continue to avoid restocking inventories and are only buying for immediate consumption. Steel buyers were delaying payments to about 60 days of delivery from a previous 10-15 days, said a Chennai-based trader.

A west India-based mill dropped its offer for galvanised sheet with thickness of 0.75-2mm with zinc coating at 90 grams/m² lower by 2,000 rupees/tonne ($28/t) over the previous week to Rs47,000/t ex-works.

Prices of colour-coated sheet with 0.5mm thickness with zinc coating of 120gsm also fell by Rs2,000/t to Rs54,500/t over the past week.

Delegates at an automotive steel summit in Delhi said that lower production of cars because of a glut of around 500,000 vehicles with auto producers and dealers has hit demand for coated steel.

Consumers have postponed vehicle buying decisions as Indian banks are facing high defaults and are being choosy about who to lend to.

"There is a crisis of confidence in the financial system. Banks have lots of money but do not want to be accountable for creating fresh bad loans," said the president of the Steel Users Federation of India Niranjan Turakhia.

Demand is also sluggish from sectors such as consumer durables and roofing sheets for construction.

But a dip in bank lending rates, combined with the start of the festive season from October onwards, is likely to turn sentiment positive and drive up steel demand, the managing director of Jindal Steel & Power VR Sharma told Argus.A robust agricultural harvest in September and October is likely to raise farm incomes and consumption in rural areas.

Demand for automobiles will be much firmer in October-March, the second half of the 2019-20 fiscal year, compared with April-September, as a let-up in heavy monsoon rains this month will allow more buying. Policy clarity by government on the speed of adoption of electric vehicles and enforcement deadlines of new vehicle emissions regulations will help lift demand, said the chief marketing officer of Essar Steel Ranjan Dhar.

source: Argus Media