Owing to production curbs in China’s Tangshan region, steel supply is in shortage in the global market. As a result, steel prices in the export market have increased by 6-8% in April 2021 in comparison to the previous month. Steel prices are seeing a spike even in the domestic market. However, domestic prices are still at a discount to global prices.
Growing Opportunities in the Export Market
Due to the decline in Chinese steel exports, the opportunities have increased for steel manufacturers in countries like India, Korea, and Japan. Indian Hot Rolled Coil (HRC) export prices have increased ~13% in April over the last month. Domestic prices in Europe and the US are at an unprecedented high of USD 1,026/tn and USD 1,288/tn, respectively.
India’s steel imports rose by 33% MoM in April to 501-kilo tn, whereas exports rose by 126% YoY to 1,293 kt. The net steel exports stood at 792kt, the highest in seven months. During FY21, India’s exports increased by 29% YoY to 10.8mt, whereas imports declined by 30% YoY to 4.8mt. It is a healthy sign for domestic steel manufacturers.
Prices Remain Elevated in the Domestic Market
In the domestic market, primary producers have raised the prices by ~Rs 4,000/tonne in April 2021 on a monthly basis. This is the second price hike in as many months. HRC prices in the traders’ market stand at Rs 60,500/tonne, up to Rs 5,000 MoM in April.
Despite the recent hike, domestic steel prices are trading at a 7% (~INR5000/t) discount to imports from Korea. It indicates that there is still some room available for domestic manufacturers to increase the prices.
Raw Material Prices Inch Up
NMDC raised iron ore prices by Rs 250-500/tonne for fines and lumps in April 2021. This hike has come on a Rs 100-250/tonne price hike announced in the last week of March 2021.
The increase in iron ore prices is due to the price hike by Essel Mining who is the largest miner in Odisha. The company has raised prices by Rs 725-Rs 1,200 per tonne for fines/lumps in April 2021 because of the bids offered at premium prices in recent auctions.
Coking coal prices have declined by 9% in April in comparison to the previous month.
Going ahead, the price hike is likely to be absorbed as demand from export and the domestic market remains strong for steel. And, the recent price hike is not expected to be the last one. There is a strong possibility of another price hike in the Indian steel market as domestic HRC prices are still trading at a discount of ~7% in comparison to global steel.