HRC Price Premium Reversal Signals Market Demand and Supply Shift
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Flat steel prices remained stable but demand is shifting. A resurgence in demand from construction and infrastructure is needed, as reduced consumption of Hot Rolled plates is causing a downturn in India. New mining cess laws could increase costs, affecting steel industry margins and competitiveness.
Price
- The prices of flat steel products remained stable during the closing week of the month. They are listed below for major markets.
- The HRC offers are below:
- Ex-NCR/Delhi: Rs. 52,800/ton
- Ex-Mumbai: Rs. 52,800/ton
- Ex-Ahmedabad: Rs. 53,300/ton
- Ex-Chennai: Rs. 54,000/ton
- Ex-Kolkata: Rs. 52,000/ton
- Ex-Hyderabad: Rs. 52,500/ton
- The CRC offers are below:
- Ex-NCR/Delhi: Rs. 58,000/ton
- Ex-Mumbai: Rs. 62,000/ton
- Ex-Ahmedabad: Rs. 64,500/ton
- Ex-Chennai: Rs. 63,500/ton
- Ex-Kolkata: Rs. 61,000/ton
- Ex-Hyderabad: Rs. 62,500/ton
- PM Plates prices for Delhi NCR stand at around Rs. 59,500/ton and Rs. 58,700/ton for Mumbai on an ex-works basis, respectively.
Demand and Supply
- A resurgence in demand, especially from the construction and infrastructure industries, is vital for the steel market. The reduction in demand across key end-use sectors, notably construction and automotive, has significantly decreased the consumption of Hot Rolled (HR) plates, which are essential for fabrication and construction. Thus, the domestic market for Hot Rolled Coil (HRC) in India is currently facing a downturn.
News
- ICRA warns that new mining cess laws, upheld by the Supreme Court on August 14, could increase cost pressures for the steel industry. The ruling allows states to levy taxes on mineral rights and seek refunds of past royalties, potentially raising operational costs. This may reduce operating margins for primary steel producers by 60-180 basis points and for secondary producers by 80-250 basis points.
- Additionally, increased cess rates, such as the 15% under ORISED, could raise the landed cost of iron ore by 11%, impacting steel competitiveness. Jharkhand’s recent Rs 100/tonne increase in iron ore and coal may set a precedent for other states.
Expert’s Opinion
- The reversal of the Hot Rolled Coil (HRC) price premium over rebar suggests reduced HRC demand or oversupply. This price inversion has alarmed steel industry stakeholders, leading producers and investors to reassess strategies. They are monitoring market trends for potential price and demand shifts and preparing for impacts on operations and profitability.
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