Hot-rolled coil prices hit 34-mth low of Rs 34,250 /tonne in October: Report

Domestic hot-rolled coil (HRC) prices fell to a 34-month low of Rs 34,250 a tonne during the second week of October, owing to subdued demand, according to a report.

HRC prices ruled at Rs 42,250 a tonne in January 2019, the report by Icra said.

The rates kept on hovering around Rs 40,000-41,000 per tonne from March-end till July-end and from July-end kept on falling to reach a level of Rs 34,250 a tonne during the second week of October.

India's HRC prices fell to a 34-month low level of Rs 34,250 in October second week and have fallen by 16 per cent in the current fiscal following lacklustre demand from the key end-user industries, Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, said in the report.

"Domestic HRC prices, which remained much higher than the anti-dumping duty (ADD) notified levels during FY2018 and FY2019, have witnessed a steep correction in the last few months owing to a weakening of domestic demand conditions and has dropped below the ADD stipulated level for the first time in the second week of October 2019.

"As per the definitive ADD imposed on certain flat steel products in May 2017, which are valid till August 2021, the threshold price for HRC stands at USD 489 tonne (about Rs 34,719/MT at USD/INR exchange rate of 71), which in turn sets a floor price for the domestic HRC," the report said.

Also, the steel prices plummeting lower than the floor prices due series of rate cuts has raised concerns about domestic demand conditions, Icra noted.

India's steel demand growth dropped to 5 per cent in H1 FY2020 against much higher growth rates of 7.5 per cent and 7.9 per cent achieved in FY2019 and FY2018, respectively.

While the domestic steel consumption growth during first quarter of FY2020 stood at 6.9 per cent, the growth rate during second quarter FY2020 eased to 4 per cent, with the consumption reporting a year-on-year contraction of 0.2 per cent in September 2019.

The moderation in steel demand, Icra said, is largely attributable to the weakness in the automobile and construction sectors.

"Auto sector continued to witness a fall in sales, with sales de-growth during Q2 FY2020 remaining higher at 18.1 per cent than Q1 FY2020 de-growth of 10.5 per cent. Even the construction sector output growth deteriorated to a seven-quarter low of 5.7 per cent in Q1 FY2020 from 9.6 per cent in Q1 FY2019 which, along with a softening of growth in gross fixed capital formation (GFCF) to 4 per cent in Q1 FY2020 from 13.3 per cent in Q1 FY2019, reflects the headwinds being faced by the steel sector," the report said.