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Sluggish demand in domestic markets keeps ferrous prices subdued

* During Dec’24, flat steel prices remained largely muted MoM for both HRC and CRC at INR47,000/t and INR53,700/t (vs. INR48,000/t and INR55,500/t in Nov’24), respectively. This is primarily because of weak global prices, weak domestic demand, and elevated imports into India. Chinese HRC (FoB) prices slipped 2% MoM to USD488/t in Dec’24 (USD570/t in Dec’23) and continue to drag the steel prices globally. Domestic long steel prices also declined 3% MoM to INR53,100/t in Dec’24 due to sluggish demand in the trade channels.

* India’s crude/finished steel production rose 2%/4% MoM to 12.6/12.2mt in Dec’24 (provisional). Imports softened from the peak of 1mt in Sep’24 to 0.76mt (flat MoM), while exports remained flat MoM at 0.45mt in Dec’24. Our channel checks suggest that steel prices will remain under pressure in the short to medium term owing to sluggish demand.

* India's finished steel imports hit a 6-year high from Apr-Dec’24, totaling 7.27mt (+20% YoY). In contrast, India's finished steel exports saw a steep drop of 25% YoY to 3.6mt, marking the lowest in six years. As China is the largest steel producer/exporter, its total export shipment over Apr-Nov’24 reached ~110mt, registering a 23% YoY growth. Given this, the glut of cheap Chinese steel caused weak pricing sentiment globally.

* For non-ferrous, the average alumina prices in Dec’24 moderated to USD716/t, down 1% MoM, and as of mid-Jan’25, it has slipped to USD573/t. Aluminum, copper, and nickel prices corrected marginally ~2% MoM in Dec’24. In contrast, zinc and lead prices inched up MoM to USD3,040/t and USD2,000/t in Dec’24, respectively

Iron ore prices firm; coking coal prices remain muted in Dec’24

* In Dec’24, the iron ore prices remained firm at INR6,350/t for lumps and INR5,410/t for fines, after the two consecutive price hikes by NMDC during Oct’24. Recently, NMDC announced a price cut of INR350/t for both Baila lumps and fines from Chhattisgarh.

* We believe iron ore prices will remain soft going forward, as weak sponge iron and steel market sentiments may restrict iron ore prices from any material upside.

* Premium HCC Coking coal prices (CNF Paradip, India) declined 2% MoM at USD215/t in Dec’24. Australian coking coal prices are anticipated to remain range-bound due to weak demand.

* Domestic coal production was up 5% YoY to ~98mt, while Coal India reported production growth of 8% YoY to 72mt in Dec’24. In 3QFY25, Coal India’s total production rose 2% YoY to 202mt.

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