Indian Hot-Rolled Coil Market are Enticing Overseas Export Offers

New Delhi: In India, the Hot-Rolled Coil (HRC) prices showcased a slightly up swinging trend in the last week of July, backed by the lower capacity utilization. As per market players, the factor supporting the HRC prices are curtailed production activity which kept inventories quiet, higher import offers from Russia, and the tumbled Chinese market.

In July, production cuts were undertaken by mills, maintaining low stocks at the mill and supplier levels. Most primary mills have brought their maintenance shutdown, usually around October. Furthermore, flat products had been under pressure because of the 15% export tax double whammy and sluggish domestic demand. The export tax fell harder on flat products, including Hot-Rolled Coil (HRC) and Cold-Rolled Coil (CRC), because around 80% of India's steel exports comprise flat steel.

Stockists site that Russian imports are happening, but these are not a threat at the moment. The cargoes ordered so far and in transit are some distress trades from Russian manufacturers and thus are a one-off event. Thermal coal keeps long prices firm. However, the impact of high thermal coal prices was felt by long steel, where secondary mills account for an overwhelming 60–65 percent of production. After the sanctions capped Europe's imports of Russian gas, thermal coal prices increased. As a result, thermal coal, which had previously been less expensive than coking coal, rose in price relative to the latter, increasing the cost of production for secondary mills. However, the reduction of export duties has Indian mills optimistic. Although the ministry did not provide such signals, the mills are optimistic that the export charge may be eliminated in the current quarter itself.

Sporadic deals to neighboring Nepal and the Middle East are taking place, but the offers are far below what Indian mills realized from their large European send-offs. Ex-mill realizations of boron-added hot rolled coils delivered to Nepal are in the INR 50,000/tonne range. Manufacturers claim that all of these are boron-added to avoid the 15% tax, which, if applied, would reduce ex-mill prices to around INR 45,000/Tonne. However, production cuts enable mills to absorb the lack of export bookings. Despite this, HRC prices in China appear to be bottoming out and stabilizing, supported by production cuts and a better demand outlook in the second half.

In the Gulf Cooperation Council (GCC) market, Chinese mills are attempting to raise hot rolled coil prices. Buyers prefer Indian materials due to lower costs and shorter lead times. South Korean mills are interested in the GCC market, and Hyundai Steel representatives plan to visit the region soon. An Indian mill closed several deals last week for pipe- and tube-making grades at an average price of INR 50,390/tonne CFR United Arab Emirates. This week, Indian boron-added HRC offers for September shipment have traded at INR 49,600-50,400/t. Chinese quotes for end-of-September shipment/late-October delivery are currently at INR 51,000-52,000/t CFR. All offers are based on CFR GCC ports.

According to the ChemAnalyst, "The demand season resumes in August-September, so mills are upbeat about domestic sales picking up soon enough. On the other hand, how long the production cuts will continue is a moot point. Jindal South West (JSW) Steel revealed that it would take a roughly 5% drop in production annually, while Jindal Steel and Power Limited (JSPL) has kept its production targets firm."