Spreads have started to shrink, which remains a negative event for local flat steel players.
According to a report released by AKD Research, HRC and CRC are currently trading at $100 per tonne as compared to a high of $142 per tonne and an average of $128 per tonne in November 2021.
It said that major decline is attributable to 15 percent reduction in CRC prices to $857/tonne against an average of $893/tonne in November 2021 owing to policy tightening in China to limit exports.
China cancelled export rebates in August which started to reflect in November 2021 shipments (-1 percent on a month-on-month basis) and it is expected that the declining trajectory will continue in the medium term.
The contraction in CRC-HRC spread remains a negative event for local flat steel players including International Steels Limited and Aisha Steel Mills Limited, as they reduced the local CRC prices by Rs8,000/tonne to Rs236,000/ton post global decline of 15 percent MoM in CRC prices in November 2021, said the report.
On the other hand, the report said, international aluminium, zinc and lead prices have started to retreat, contracting 17.3 percent, 14 percent and 10.3 percent MoM as of December 7, 2021 after swelling by 28 percent, 30 percent and 11 percent in 4MFY22, depicting early signs of metal commodities upcycle losing stream amid energy concerns and gradual decline in overall demand.
On the flipside, scrap and copper prices have sustained their momentum where FYTD average prices currently stand at $473/tonne and $9,488/tonne, respectively. Scrap/copper prices are currently trading at $460 and $9,556 per tonne.
Due to both metals being central to net zero emission campaign, the prices have sustained the elevated levels where uncertainty on new recycling restrictions in Malaysia have caused the scrap market to tighten while US$1trn infrastructural bill passed by congress and surge in Electric Vehicles (EVs) demand may continue to keep copper prices at elevated levels, said the report.
