Prices of CRC up

The price of locally-produced Cold Rolled Coil (CRC) for various flat steel grades has witnessed a hike for the second time during the ongoing month.

The industry has increased prices of CRC by Rs3,500 per ton over the weekend following a hike in global prices.

This is the second time in the ongoing month that the industry has revised prices of CRC upward in the local market. Now, the price of the benchmark local prime grade of 1.2mm (inclusive of all taxes) is Rs178.5k per ton.

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So far in the current financial year 2021, the price of locally-produced CRC has increased by around Rs19.5k per ton (12.3%). We believe local players have managed to pass on the cost pressures since the price of its raw material i.e. Hot Rolled Coil (HRC) has increased by 11% in rupee terms (13% in USD), Sherman Securities said in a research note.

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Rising local CRC price is directly related to jumping in HRC prices in international markets amid global demand recovery post-vaccine drive and ii) ongoing port congestion issues especially in South Asia. Where the former is indeed a significant factor in driving local prices, the latter is turning out to be a major factor as well since it is hurting CRC imports enabling local players to pass on cost pressures easily.

International CRC margin

CRC price in the international market (derived from local company prices) has been on a rising trend in the ongoing quarter, much higher than the HRC price (Japan region). We believe that this is mainly on account of limited CRC imports in the backdrop of ongoing supply constraints, which has led to an increase in CFR prices compelling local players to charge a premium.

Thus, we expect the ongoing quarter to be better than last as the international margin has improved to around an average of US$102 per ton so far versus US$85 per ton in the December quarter.

“We believe that primary margin of local players would remain better in the ongoing quarter, the however quantum of inventory gains in March would be slightly lower compared to December, Sherman Securities said adding that we maintain ‘Over-Weight’ stance on flat steel segment and continue our liking for ASL and ISL.