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Ferrous prices remain in a tight range ahead of Union Budget

* Though Tier-I mills announced a price hike of INR1,000-1,500/t in the second week of Jan’24, trade-level HRC and rebar prices remained range bound at INR54,000/t and INR51,400/t, respectively.

* A ban on non-essential construction in certain parts of North India during the winter season, higher inventory levels, volatility between IF and BF prices, and a liquidity crunch among vendors have collectively contributed to keeping long steel prices subdued. Currently, these prices are at their lowest levels since Aug’23.

* The price parity between the IF and BF routes increased to ~INR7,300/t in Oct’23, adversely affecting the demand for primary long steel products during the winter season. However, the gap has subsequently narrowed to INR2,700/t.

* India experienced higher imports between Oct’23 and Dec’23, which led to inventory built-up across channels. Though Tier-I mills recently undertook a price hike, it was offset by higher imports and vendor-level inventory.

* We believe, with the upcoming Union Budget this week, ferrous prices would remain range bound as mills-vendors-customers enter the ‘wait and watch’ mode.

Share of China in world steel production drops to 25 months’ low

* China, which dominates the world steel sector, witnessed a contraction in market share in Dec’23 at 50% (lowest since Nov’21). Crude steel production was down 13.5% YoY and 11.4% MoM at 67.4mt, the lowest since Feb’18.

* For CY23, Chinese crude steel production stood flat at 1,011mt with a market share of over 55%.

* India, Turkey, and the US are the only three countries among the top 10 steel manufacturers that witnessed an increase in steel production in Dec’23.

* Crude steel production in India stood at record levels, surpassing the 12mt mark (up 3.4% MoM), while Turkey reported the healthiest growth of 6.7% MoM (3.2mt in Dec’23).

* For CY23, India outperformed the global steel sector and crude steel production grew ~12% YoY at ~140mt. Despite India possessing a global installed steel capacity of ~6%, the total global market share stood at ~8% (CY22 market share was ~7%). ? Globally, ~46mt of gross capacity additions are expected over the next four years and over 75mt of additional capacities are under the planning stage with a majority of the incremental capacity coming up in India.

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