Steel prices slipped down both on a week-on-week and month-on-month (m-o-m) basis with an improvement in demand remaining elusive. Investors are thus watchful about any development pertaining to the removal of steel export duty that can help push up sales and in turn lead to a reduction in inventory.

Indian steel mills cut the price of hot rolled coil (HRC) for August 22 to ₹58,500 per tonne, which is a reduction of ₹3,500 per tonne m-o-m, and cold rolled coil (CRC) to ₹66,000 per tonne, a reduction of ₹2,500 per tonne m-o-m, to align more closely with trade channel prices, suggested Nomura Research data.

On the trade channel, HRC prices fell by ₹400 per tonne week-on-week to ₹57,400 per tonne, still reflecting weak demand amid oversupplies because of the imposition of export duty, said analysts at Nomura.

The ongoing monsoon is adding to the pressure on steel demand in the country. The first quarter had seen channel destocking leading to an impact on sales volumes for steel manufacturers. The lower exports are adding to the build-up of inventory and forcing steel manufacturers to align production accordingly.

“We believe the inventory position as reported by the JPC (joint plant committee) will undergo an upward revision in August 2022″ as large mills have accumulated a total of more than 2 million tonne (mt),” said analysts at Motilal Oswal Financial Services Ltd.

Steel production in India remained flat on a m-o-m basis in July 2022 at 9.97 mt, down 0.7% year-on-year, after the imposition of export duty on steel, leading to an accumulation in domestic inventory, said analysts.

Meanwhile, China’s demand and production also remain important to support the prospects of Indian manufacturers.

The Indian HRC Export Index fell $18 per tonne week-on-week to $565 per tonne on subdued demand across all key regions, said analysts.

Weak domestic demand in China also remains another key concern. However, the positive is that China’s production is also seeing some downward adjustment. At current prices, Chinese producers according to analysts are not making much money because of the higher cost of coal.

A survey by Mysteel for 247 steel mills highlighted that the capacity utilisation of steel mills has declined by 210 basis point plus w-o-w to 79.3%, the lowest level since February 2022, because of weak profit margins, which led to maintenance-related shutdowns, suggested Nomura analysts.

The declining production can support international steel prices. Market watchers are keeping an eye on any China stimulus to push infrastructure and potential stabilisation of the weakening property and real estate sector. This can help stabilise China’s demand and prices. The Chinese stimulus can also lead to some recovery in base metal prices such as that of copper, and zinc, prices of which have fallen significantly on London Metal Exchange. Source: Livemint