India steel: HRC prices fall on slow festive spending

India's domestic hot-rolled coil (HRC) prices fell this week, as the onset of the festive season in September has failed to drive demand.

The festive season that lasts through November was expected to drive consumer spending on real estate, automobiles and consumer durables. HRC acts as a key input in all these sectors. But consumers facing recessionary conditions are unwilling to make any high-value purchases.

A reduction in lending rates by Indian banks has failed to result in higher consumer spending. The Reserve Bank of India cut its lending rates banks four times during the past nine months. But this has not translated into higher lending, as banks are wary of adding to their high levels of existing stressed assets. A merger of 10 state-owned banks has been announced to help consolidate their assets.

The Argus assessed price for HRC 3mm thickness dropped by 500 rupees/t ($7/t) to Rs35,500/t ex-Mumbai over the past week.

A trade emerged this week at Rs35,000/t for a small quantity of 300t on the outskirts of Delhi. But prices were slightly higher in Mumbai.

The main integrated mills were offering HRC at Rs36,000/t and open to offering discounts, while some smaller steel mills in north and east India were offering even lower at Rs35,500/t. But bids remain low at Rs35,000/t.

The Argus assessed price for Indian HRC has dropped by Rs5,000/t since the first week of June.

A number of relief measures announced by India's finance minister Nirmala Sitharaman today are likely to provide an impetus to consumer spending. She announced a drop in the effective corporate tax to around 25pc from the previous 30pc, provided no other subsidies or benefits are used. This may add to the bottom lines of steel mills but not add much to steel demand, a Delhi-based trader said.

Sitharaman also announced the setting up of a Rs100bn housing fund to help complete stalled mid- and low-income housing projects, which may have a positive effect on steel demand. But analysts see the fund as too little to kick-start the sluggish real estate market with little clarity yet on the details and timeline of funding projects.

Indian mills continue to make highly competitive offers in Asia markets. Indian offers for HRC SS400 grade 3-12mm thickness were at $455/t cfr Vietnam for November shipment.