The S&P BSE Metals Index is well above the Sensex benchmark. Since the emergence of the coronavirus scare (COVID-19) that hit the markets, the index has decreased by about 43%, compared to 29% for the Sensex.
Aluminium, copper and zinc have also fallen sharply on the London Metal Exchange (LME) with prices between 10 and 25%; steel prices remain stable, but there are signs of correction in the coming weeks.
Steel prices have increased by 15% over the last three months and the last round of negotiations in March (Rs 500-800) is still ongoing. However, the market considers that the correction is likely to take place in April.
According to analysts, the margin is likely to decrease from the first quarter onwards. In addition, China has increased tax reductions on exports. This indicates that she is trying to get the export out of the country. In any event, the hot-rolled coils (hot-rolled coils), which are the reference for flat-rolled products, benefit from a premium of 2 % over the price of imports on land from South-East Asia.
The director of Jindal Steel & Power V.R. Sharma said the demand is stable at the moment, but emotions have decreased because people are afraid of the virus outbreak.
Charm does not expect any further price increases, but does not openly worry about it. According to him, next month will be good for the exporters. A lot of requests come from China, he said.
With regard to the Chinese imports into India in connection with the rebates, Mr Sharma said that this does not constitute a threat. They have to meet BIS standards.
However, in the domestic steel industry, secondary players, which account for 55% of production, are the most vulnerable; they are fragmented and only affected by small projects.
The big players, on the other hand, have huge projects and institutional resources. A fall in prices will therefore have a significant impact on the secondary players if the virus epidemic is not contained.
However, there are also concerns about deliveries, as more and more states are announcing blockades, which is reflected in the ICEX steel treaty for the long month of April. On Friday it rose by Rs 620, or 2.6 percent compared to the previous figure of almost Rs 28,740 per ton. However, in February the contract was concluded at Rs 31,740 per tonne.
Maximum pressure on aluminium continues
Aluminium, which was already weak anyway, could undergo further corrections in the short term. S. K. Roongta, Balco’s president, said the outbreak of the virus could have a short-term negative impact on demand.
In the long term, strengthening infrastructure will help to reduce demand.
It is feared that the projects will slow down. The aluminium ladder business is still under pressure due to low margins and volumes due to the lack of orders. The wire and cable segment is also booming because order intake is slowing down, says Sandeep Daga, an expert and consultant in the steel industry and director of Regsus Consulting.
Typically, companies and large customers terminate supply contracts with manufacturing companies at the end of the fiscal year, an industry official said.
Negotiations continue, but due to a sudden drop in metal prices and rumours of a global recession, most major buyers are not terminating their supply contracts. Domestic industry has been facing slower growth for more than a year and is already reducing its inventories. The situation will only get worse, said the industry representative.
The copper flows as if China isn’t back to work yet.
Last month, LME copper prices fell by about 15%. Demand for copper has fallen sharply as China slowly returns to work, Hindustan Oblast copper officials said. China is the world’s largest buyer of copper.
The price of red metal has fallen sharply on the LME. Consumer spending is declining as KOVID-19 travels around the world. In addition, the outbreak has led to disruptions in the supply chain, which will undoubtedly have a negative impact on the copper industry, they said.
said Jayantha Roy, vice president of ICRA: Prices have fallen due to concerns about global economic health as a result of the virus outbreak, but supply disruptions may not have been taken into account. The world’s largest copper producer, Codelco, announced a reduction in its production activities. This corresponds to the state of emergency declared by the government to contain the spread of the virus. Sooner or later it will have an impact on the offer.
Diving into the iron ore trade
said a senior official from Essel Mining & Industries: We (the iron ore industry) are certainly seeing a decline in business, but we hope that the business climate will improve in the next three months as China begins to report fewer new VID 19 cases.
The mines are now operating as usual and there is no reduction in mining activity. The Aditya Birla Group owns iron ore mines in Odisha.
However, prices have fallen. Prices in the 10 to 30 mm range have fallen by Rs.400 to Rs.500 per ton since January to Rs.4500 per ton. This price level coincides with the price point of March 2019. On the other hand, prices for the supply of iron ore in the Odyssey region remained unchanged. The dominant player, NMDC, reduced its prices by Rs.50 per ton for fines and Rs.60 per ton for coins. But in the monthly comparison, prices rose by Rs 380 per tonne.
Global zinc reserves are at a minimum level, but prices are determined by sentiment.
According to Rahul Sharma, director of the International Zinc Association of India, all of the country’s steel mills, which are major consumers of zinc, are located in remote areas and outside the city or cities affected by VIDOC-19.
To date, no production unit has reduced its steel production. So, if the government can stick to KOVID-19, we certainly won’t see any impact on zinc consumption in the country, Sharma said.