Indian steel: HRC prices slide amid slow buying

India's domestic hot-rolled coil (HRC) prices fell this week as demand weakened, with buyers pulling back amid a liquidity crisis.

The Argus-assessed price for HRC ex-Mumbai fell by 250 rupees/t from last week to Rs40,500/t ($586/t).

HRC offers by three major integrated mills based in Delhi and Mumbai were heard at Rs41,000/t, with the best bids at Rs40,000/t.

A trade was heard at Rs40,500/t for 3mm HRC on cash payment terms this week.

A few cargoes of Japanese and South Korean HRC were sold into the Indian market at $530-535/t on a cfr basis this week.

A price hike by major integrated mills including Sail, JSW Steel and Tata Steel earlier this month has largely not been accepted by steel traders and retailers, which continue to struggle with fewer bookings from downstream buyers.

"Distributors are dropping prices in desperation, as bookings are a rare occurrence," said a steel stockist in the southern city of Chennai.

Outstanding payments for contractors building infrastructure are common and construction work on most such projects has come to a standstill, said a Delhi-based steel trader.

Consumer spending on automobiles, consumer durables and real estate is also sluggish, further affecting steel demand.

Unsold inventory at automobile dealerships has risen to 500,000 units, with vehicles sales at an 18-year low, as both consumers and dealerships struggle to secure finance.

There is a cash crunch in the economy as banks struggle with around $200bn of bad loans, making them cautious about fresh lending. India's central bank has reduced policy lending rates to banks three times in the past six months, but banks have yet to make any cuts to their lending rates for corporate and retail borrowers.

The market will keenly watch the new federal government's first budget on 5 July. There is talk of stimulus and a cash infusion into the financial system to jumpstart the economy. But any such measures will likely take at least six months before they are implemented and translate into higher steel demand.

The fall in steel prices has been limited by rumors the Indian government might put in place additional safeguard measures to reduce steel imports, said the manager of a west India-based mill. India's commerce and steel ministers met this week in an attempt to find a balance between maintaining adequate steel supplies to Indian manufacturers and the need to protect domestic mills from unfair overseas competition. No details are available on the outcome of the meeting.