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Steel finds a floor; aluminium holds its gains

HRC prices, after touching a five-year low in early December, appear to be approaching a near-term cyclical bottom. Seasonal demand recovery, coupled with the recently announced safeguard duty, suggests that a near-term price trough is likely to form in Q3FY26. That said, excess domestic supply may cap pricing power for steel producers, limiting the extent of any major earnings upgrades. In contrast, aluminium fundamentals remain stronger, supported by the limited scope for incremental production in China and firm copper prices.

China-led decline weighs on global steel production: As per World Steel Association, global crude steel production declined ~5% YoY to ~140.1mn tonnes, primarily led by a sharp ~11% YoY contraction in China, while production in the rest of the world increased ~3% YoY. MoM, global output fell ~3%, with both China and ROW recording declines of ~3% and ~2%, respectively.

India steel exports surge amid CBAM-led pre-buying: India’s crude steel production rose ~11% YoY to ~13.7mn tonnes in November, with provisional December data indicating a further ~5% YoY and ~3% MoM increase. On the trade front, imports declined sharply by ~45% YoY to ~0.46mn tonnes, while exports increased ~38% YoY to ~0.62mn tonnes. For April-November 2025, India’s steel exports (including stainless steel) grew ~31% YoY to 5.77mn tonnes, driven by pre-emptive restocking by EU buyers ahead of the phased implementation of the Carbon Border Adjustment Mechanism (CBAM). Finished flat exports to the EU surged ~45% YoY to 2.46mn tonnes during the period. Notably, India fully utilized its HRC safeguard quota for Q4CY25 by end-November, well ahead of the 31 December 2025 expiry.

Domestic steel prices recover, while global trends mixed: After declining ~4% MoM for two months, China’s HRC export prices rebounded ~1% MoM in December. Global HRC price trends remained mixed, with prices in the US rising ~6% MoM and in North Europe up ~3% MoM, while Japan witnessed a ~2% MoM decline. In India, primary rebar prices recovered ~3% MoM in December after remaining flat for two months, while domestic HRC prices increased ~2% MoM following mill announcements of HRC and CRC price hikes in the range of ~INR 750-1,000/tonne in late December. The recovery was further supported by firm domestic iron ore prices and higher imported coking coal costs due to INR depreciation.    

Steel mills have also announced another INR 1,000-2,000/tonne price hikes in early January. This is expected to help support steelmakers’ margins amid rising coking coal prices and steel prices hovering at multi-year lows in early December. On the raw material front, iron ore prices rose ~1% MoM in China and ~2% MoM in Australia in December, after a decline in the previous month.

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