How Exports are Influencing Indian Domestic HRC Prices?

Indian mills reported to have increased HRC offers by upto INR 750/t ($10.5) for November deliveries. Market participants feel this hike is largely supported on optimism seen in export market rather than improvement in domestic demand. SteelMint analyse why Indian HRC prices are so influenced by export market these days.

Why hike?
SteelMint checked from its channel that Indian mills have booked some 3-4 shipments of HRC to South East at around $425/t CFR levels, early this week for Nov/Dec shipments.This price is higher by $5-10/t from last deals.

Some bookings have also been made to Middle east at $440/t CFR levels. Demand from European countries have improved as buyers show interest to book before Christmas and new year holidays. It can be inferred that price hike is largely due to export demand than domestic buying as most of the Indian mills have export orders till November/December.

Rising share of exports in total Indian HRC production
Share of exports in total Indian HRC production have increased significantly in last few months. According to data complied by SteelMint, HRC exports have increased to 700,000 MT per month levels in last 2-3 months against an average of 350,000 MT. Current exports are around 17% of total HRC production in India which was earlier 12%. JSW, Tata and Essar being the largest exporter of HRC.

Absence of Chinese HRC offers in seaborne market
It is noticed that China is not active for last few months on various reasons like strict environmental norms which has forced mills to cut their production, Chinese government stimulus which is supporting domestic demand.

Chinese HRC exports offers are unusually higher than the Japanese and Korean offers. For instance Chinese HRC export offers to Vietnam stands at $435/t, where as Japanese offers are reported at USD 430/t, CFR, Korean at USD 425/t CFR and Indian at USD 420-425/t on CFR basis. No wonder why Indian HRC exports are gaining attention in seaborne market.

Pressure on Indian mills as domestic demand slows down
Indian mills are under pressure clearly after reported slow down in auto sector, which is one of the largest buyer of flat steel. Demand from Auto sector is down by around 20-30% in last few months. Indian mills are exploring export market to clear their inventories.

Will the influence continue?
Export prices will play an important role to decide domestic prices looking at HRC capacities coming up in 2020. It is expected HRC capacity in 2020 will increase to 56 MnT MnT against current installed capacity of 46 MnT