HRC and rebar price range has narrowed to around INR 10,000/tonne (ton) ($135/t). Against the background of the past five months, this expanded to a record INR 16,000/ton ($216/t) in June'21, but then contracted steadily in October to INR 13,000/ton ($176/t) in October. In November, the gap narrowed even more.
The average monthly trading level price for BF-route rebar stands at INR 57,600/t ($778/t) HRC versus INR 70,700/ton ($955/t) per.
The spill had reached a record high following rapidly rising coal prices.
Factors that can narrow the gap:
Facilitates coal pressure: Mills with induction furnace (IF) are highly dependent on thermal coal, especially sponge. Due to the shortage of domestic supply, they had to resort to imports at astronomical rates, which increased the production costs of the final product, rebar. Rebar price movements also affect the YF rating, as IFs account for almost 70% of the domestic market. An increase in IF quality gives primary producers room to raise their prices.
However, coal prices have cooled off a bit. For example, India's port thermal coal prices, which were previously trading at INR 7,000-8,000/tonne ($95-108), are now INR 13,000/tonne ($176) after peaking at INR 18,000/tonne ($243/t). /ton) level. ) Also, with improved supplies from Coal India, IFs have a chance to lower rates According to latest data, offers of Fe500 IF grade rebar in local markets have dropped by INR 100-1,000/tonne ($1.35-13.5/t) But again Coal is also trading at twice the previous levels. This may not allow IFs to lower prices from here.
Cost pressure of primary mills: Production cost of primary mills is still high. Since coking coal contracts are signed quarterly, the cost impact will remain at $200-250/ton in the short to medium term. Australian premium low volume HCC has reached INR 23,500/tonne since January 21. At the steel level, this translates into a cost impact of INR 18,000-19,000/tonne ($243-257/t).
RINL factor: With this large PSU experiencing loss of crude steel and hot metal output due to a technical failure in one of its three blast furnaces, there could be a drop in billet and rebar supply in November, which should support current prices.
HRC standing: A month ago, HRC prices were trading at higher levels, margins were good and producers were expecting good demand. However, now HRC is taking a step back due to negative export sentiments. There are zero export reservations in the last month. Export prices in the world are falling. For example, HRC offers from China to Vietnam have dropped to $765/ton CFR. Moreover, domestic prices are softening globally. Chinese prices decreased more than RMB 300/ton ($47/ton) last week.
These factors will not allow producers to increase their HRC prices in the short term.
Therefore, there is no possibility for long product prices to decrease from here. At best, they'll stay solid if they don't rise as coal is expected to stay high until the end of the year.
On the other hand, local HRC prices may round or hold steady depending on the downward flat steel outlook.
Emotions are low from market-boosting China, where prices fell more than RMB 300/ton (ton) ($47/ton) last week. The Shanghai Futures Exchange HRC-rebar margin narrowed as the former decreased and the latter increase due to coal shortages and electricity problems. Currently, rebar stands at RMB 4257/ton ($666/t) versus 4,502/t ($704/t) HRC.
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