India's HRC importers hit by falling steel prices

Indian importers of hot-rolled coil (HRC) have suffered large losses in the last three months as bets on a demand recovery failed and domestic prices fell to over three-year lows.

HRC prices in India's domestic market have fallen by around 13pc between mid-May and mid-September, forcing some importers to sell at a loss. A slowdown in construction activity during the monsoon season, reduced government funding for infrastructure projects and heightened pressure from lower-priced seaborne shipments have combined to send domestic HRC prices to their lowest level since 2020.

Importers were paying landed costs of 50,000-51,000 rupees/t ($598-610/t) for HRC when bookings were made in May, at a time when domestic steel prices were increasing. But prices had fallen back down by the time those cargoes started arriving in July, leaving importers facing losses.

The Argus weekly Indian domestic HRC assessment for 2.5-4mm material was last assessed at Rs47,400/t ex-Mumbai on 20 September, down by 13pc compared to mid-May when prices were assessed at Rs54,200/t. Imported HRC is now being offered at Rs46,000/t, about 10pc lower than its landed cost, a Mumbai-based trader said.

Expectations of an uptick in demand following India's national elections in June failed to materialise. Some market participants then forecast that prices would recover in September on the back of a post-monsoon rebound in construction activity. Prices instead kept falling as the government did not release funding for building projects as had been expected, while the availability of cheaper imports and rising domestic production created excess supply.

"The thinking was that even if we faced losses in the beginning, we would be able to cover them later when prices rose. But the price decline has continued," a Chennai-based HRC importer said.

"Currently, there is no risk appetite left among importers. We have sold out whatever we imported and now we are buying from other importers," he said.
The steel unit of NMDC, India's state-owned iron ore mining firm, has also started selling HRC recently. This has added to the pressure on domestic prices by increasing supply, market participants said.

HRC offers from overseas sellers to India have also fallen in recent months, in line with the downturn in domestic demand and sluggish Chinese markets. Importers booked volumes from Vietnamese steelmaker Formosa Ha Tinh for $590-595/t cfr India in May, but levels fell to $565-570/t in July and indicative bids were at $530-540/t cfr in August.

Buyers booked Chinese HRC for around $560/t cfr in late April, while the latest bookings were at $490-495/t cfr India.

Support from duties

New import offers have all but dried up recently given increased discussions that anti-dumping (AD) duties could be imposed on Vietnamese HRC, and that tariffs could be raised on imports from China, market participants said. India launched an AD probe into Vietnamese imports in August, while the steel ministry has backed raising tariffs on Chinese imports to 10-12pc from current levels of 7.5pc.

Import restrictions could provide some support to prices, which have been falling with no signs of bottoming out. But there has been no official communication on AD duties yet, which has soured steel market sentiment further. Some market participants expect domestic HRC prices to fall to Rs45,000/t soon.

By Amruta Khandekar