Mumbai (Bombay): Steel costs can fall furthermore in coming weeks as national production going to steadily rise with the easing of lock-down constraints with no corresponding rise in insist, as per India(In) Ratings & Study (Ind-Ra).
As a consequence, national gross spreads per tonne — that is realisation per tonne of steel minus raw material cost — for both hot rolled coil (HRC) & rebar are awaited to fall furthermore within the 2nd quarter (Jul to Sep) of current fiscal yr. 2024-21 with a furthermore fall in costs because of oversupply.
By mid-Jun 2024, rebar spreads corrected over HRC spreads because of a sharper fall in insist than available supply. This has been due to the presence of multiple small & mid-sized players & fragmented nature of the sector in the long products section, leading to intense competition.
Although, stated Ind-Ra in its latest credit information digest, rebar spreads are likely to be less effected over the near term as many as end-FY21 compared to HRC because of a likely best insist pick-up, leading to a cost rise backed by this awaited implementation of govt spending on infra-structure.
Both HRC & rebar costs have been down three percent & four percent month-on-month respectively in mid-Jun. In May, steel costs temporarily rose though higher inventories have been available with steel players.
This has been because of logistical restrictions & man-power availability problems, leads to limited supply to end-use industries that steadily reopened post relaxations within the lock-down, stated the record.
Australian coking coal costs (CNF India(In), Australia premium HCC) in mid-Jun have been 17 percent lower when compared to Dec 2019’s (pre-lockdown in China). The fall in costs could be directly attributed to a fall in global insist along with Chinese import constraints & port clearance policies.
China imports of coking coal in May have been down 19.one percent year-on-year & down 23.eight percent month-on-month. With numerous blast furnaces have been closed in China, the nation rised imports of billets & slabs, that is extra cost efficient than manufacturing it, therefore furthermore helping towards the lower coking coal insist.
Although, stated Ind-Ra, a slow rise in China’s furnace production & Chinese insist — given the inventory levels are reducing in a quick pace — may rise Australian coking coal insist in China, subject to import constraints, thus supporting coking coal costs.
National iron ore costs in mid-Jun have been 31 percent lower than mid-Mar costs, prior to the lock-down in India(In). The national costs have sharply corrected because of the limited insist with most steel plants functioning in lower capability utilisation levels & high inventory with some of the small-mid-sized plants in eastern India(In) dependent on Odisha miners.
Apart from, most players stocked up on an iron ore inventory of 4 to 6 mos by end-Mar because of the anticipated risk of limited iron ore availability due to uncertainty over the timely completion of iron ore auctions.
The rise in Chinese imports benefited national steel players, specially the huge steel players who have been operational in lower utilisation levels during this lock-down & who compensated for the dull national insist by rising steel exports (majorly to China) albeit in lower margins.
Although, stated Ind-Ra, timely policy help from that govt going to support bolster insist for the national steel industry.