Indian domestic steel prices continued to exhibit strong upward sentiments last week. The Indian Long Product Price Index ILPPI increased by whooping 842 points whereas Indian Flat Products Index IFPPI increased by 223 points. The overall price index INDSPI increased by 547 points.
The reaction of Indian long product market players on Friday, which is reflected in market prices of sponge iron, scrap and pencil ingot at major locations, points to a possible scenario of major correction in coming days.
The market prices changes at some of the important locations in India are
1. December 25th 2009 - HMS down by INR 1000 at Kandla
2. December 25th 2009 - Plate cuttings down by INR 1700 at Alang
3. December 25th 2009 - Sponge iron static at all major locations
4. December 24th 2009 - HMS down by INR 1000 at Mandi
The prices of input material are coming under pressure despite efforts by pencil ingot players to hold on for at least few days. As some of them have large positions, they are reported to be propping up prices resulting in heavy fluctuations on daily basis.
The prices of long products are holding on so far, but reversal in trend is visible.
As per market reports, devoid of real demand from end users, dealers and retailer of rebars resorted to heavy stocking during the up cycle in last 25 days and are now saddled with heavy stocks. But the price movement in last two days has created panic among them as many of them stand to loose heavily if prices of long products see anticipated correction.
The pressure on pencil ingot prices stems form the fact that rerollers, see a clear down trend in coming days, and have reduced their buying of pencil ingots.
A major dealer of rebar told us that although mills are maintaining prices of rebars to clear pending deals, unofficial reduction of INR 500 per tonne to INR 750 per tonne is being offered for new deals, but without any takers.
He said that market players are already in panic and opined that if the sentiments do not become positive small retailers may resort to clearing their stocks at lower prices. He added that if this starts, it could trigger a chain reaction and we could see major reduction in market prices of input materials and long products in next coming days.
On the other hand, flat product market in India is likely to improve further as Indian steel major’s move to hike prices is yet to sink in fully.