Steel Sector Check - Some Bright Spots Emerging From China: ICICI Securities

ICICI Securities Report

Domestic hot rolled coil price (in the week ended June 7, 2023) declined by an average of Rs 700/tonne week-on-week in traders’ market following the cuts taken by major steel companies amidst weak demand.

Spot spread also contracted 3% week-on-week following a slight uptick in coking coal price. Indian HRC export price remained stable week-on-week at $570/tonne. Rebar price in primary market was down Rs 400/tonne week-on-week; however, in secondary market it remained broadly unchanged week-on-week.

Despite rather subdued domestic price environment, we see bright spots emerging in China. HRC price in China is up (for the first time in the past three months) by $30/tonne as:

1. government has issued certain policies to support real estate sector and;

2. temporary production restrictions in Tangshan and Qinhuangdao can restrict the steel output.

In our view, high exports might come off in H2 CY23. While we maintain our positive outlook on the Indian ferrous space led by higher spot spreads, rise in Chinese export prices (if sustained) could come as a shot in the arm.

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