Prices of most Indian steel products have fallen this month because of fewer transactions and a cash crunch in the economy.
Demand from most steel-consuming sectors such as construction, automobile, consumer durables and infrastructure continued to be dull because of liquidity concerns and the election-related lull in project work. Elections are being held in seven phases, with voting to conclude on 19 May and results to be announced on 23 May.
"Mills are engaged in a kind of price war, reducing offer prices and trying to grab sales," said a steel distributor from the south Indian city of Hyderabad.
The monthly domestic price of 12-25mm rebar fell by 1,000 rupees/t during 1-7 May to Rs40,000/t ($575) compared with the first seven days of April.
Buyers are stocking up cargoes on an immediate need basis as traders want to keep inventories low for the second quarter of the year ending 30 June.
Buyers are picking up mostly 40-50t cargoes this month from average cargo sizes of 100-200t over the same period in April, said a Mumbai-based trader.
Rebar offers from secondary producers, which manufacture rebar by melting scrap in electric arc and induction furnaces, were lower than prices from blast furnace-based steelmakers. These producers are selling rebar at around Rs36,000/t, down by Rs1,000/t from the previous month.
Monthly prices of flat products also fell with weakening demand.
Domestic prices of 3mm thickness hot-rolled coil declined by Rs1,000/t this month from April to Rs40,500/t, with a trade concluded in north India this week at this price. Prices of galvanised products also fell by around Rs1,500/t.
The slow progress of infrastructure and construction projects has caused a delay in payments from downstream buyers, stretching mills' cash flow, said the manager of a west India-based steel mill.
Some large mills are expanding production of long products and squeezing flat products output amid sluggish demand from the automotive sector. A New Delhi-headquartered steel mill reported a 5pc planned reduction in flat products output in May and a proportionate increase in long products production.
Rising inventories at traders are also hampering fresh steel sales, with demand not seen increasing before a new government takes office in June.
