New Delhi [India], September 20 : Domestic steel prices are expected to remain firm in September as post-monsoon construction activity gradually recovers, while maintenance-related supply constraints are likely to provide additional support to rebar prices, according to a research report by SBICAP Securities.
The brokerage expects rebar prices to outpace HRC (hot rolled coil) price increases in September, leading to a further narrowing of the HRC-BF (Blast Furnace) rebar spread as supply constraints persist and domestic demand improves gradually. It said the trajectory of domestic steel prices will primarily depend on the pace of post-monsoon demand recovery and the gap between steel exports and imports.
The outlook comes after a sharp recovery in domestic rebar prices in August. The average BF-route rebar price rose 8.6 per cent month-on-month to Rs 53,294 per tonne, snapping a three-month losing streak. The increase followed planned maintenance by several integrated steelmakers, which constrained supply, while expectations of improving construction activity supported demand.
As a result, the HRC-BF rebar spread narrowed to around Rs 5,280 per tonne in August from a 42-month high of about Rs 8,800 per tonne in July. Meanwhile, the average Mumbai HRC price rose 1.2 per cent month-on-month to Rs 58,575 per tonne in August. HRC prices subsequently climbed to a four-year high of Rs 62,000 per tonne on September 1.
India's steel consumption also remained supportive, with finished steel consumption rising 6.5 per cent year-on-year and 1 per cent month-on-month to 14.4 million tonnes in July, according to Joint Plant Committee data cited in the report. Finished steel production increased 1.4 per cent year-on-year to 13.7 million tonnes, while crude steel output rose 1.2 per cent to 14.3 million tonnes.
Steel exports rose 44.1 per cent year-on-year to 0.7 million tonnes in July, while imports increased 9.5 per cent to 0.7 million tonnes, leaving India a marginal net importer. The report noted that domestic producers benefited from trade restrictions on Chinese steel in select export markets, although HRC imports remained elevated due to previously booked cargoes.
In non-ferrous metals, the report said prices remained supported by tight supplies and lower inventories. August LME aluminium, copper and zinc prices rose 2.9 per cent, 5.8 per cent and 7.7 per cent month-on-month, respectively, while inventories of these metals declined.