PL Sector Report - Metals & Mining - Weekly Update - Domestic steel pricing lagging behind

Metals & Mining – Tushar Chaudhari – Research Analyst, Prabhudas Lilladher Pvt Ltd

Weekly Update – Domestic steel pricing lagging behind

• Indian benchmark HRC prices (ex-Mumbai) remained flat WoW at Rs 55,000/t despite firming up of global steel prices over last few weeks. Domestic steel spot spread declined to Rs 20,217/t from Rs 20,715/t WoW. Chinese HRC prices increased 2% WoW to USD 575/t.
• On import parity basis, domestic premiums have evaporated over last one month as Chinese prices have increased from USD 520/t while Indian prices declined 3% MoM. Chinese spot spreads improved 7% up WoW to USD 92/t.
  
• West European HRC prices increased to USD 630/t from USD 625/t WoW while spot spreads remained flat at USD147/t WoW.
  
• Coking coal (FOB Australia) prices increased 2% WoW to USD 322/t while iron ore fines prices (62% CNF Rizhao) remained flat WoW at USD 133/t.
  
• We believe steel companies under our coverage universe to witness margin compression in 4QFY24 unless they take price hikes; as coking coal prices have moved up sharp 21% QoQ while steel prices declined 3% over the same period. As festive season and state elections are getting over, we expect domestic demand to resume and companies would be able to take price hikes gradually in tandem with rising global steel prices.