Sentiments and prices have suffered setbacks in the local Indian cold rolled coil (CRC) market in the past week amid reports that the automobile industry is looking to drastically cut its production which has been hit by the worsening shortage of imported microchips, severely undermining festival demand in the October-November period, SteelOrbis learned from trade and industry circles.
After most Indian automobile manufacturers reported double-digit negative growth in sales in August, the availability of import microchips has become so acute that leading auto companies are looking to drastically cut output in September and October with market leader Maruti SuzukiIndiaLimited (MSIL) heard to be considering a 40 percent cut in production.
The sources said that these production cuts would not only limit auto companies’ ability to meet the traditional surge in festival demand, but would significantly reduce raw material bookings, and this is being reflected inCRCprices, even though most mills have announced that they will keep base prices unchanged for September deliveries.
According to market sources, the traded price for 0.9 mm benchmarkCRChas softened to the range of INR 75,500-76,000/mt ($1,034-1,041/mt) ex-Mumbai, down from INR 77,500-78,000/mt ($1,061-1,068/mt) ex-Mumbai a week ago.
Thinner gaugeCRC(0.2-0.35mm) prices have slumped to INR 80,000-82,000/mt ($1,096-1,123/mt) ex-Mumbai, down from INR 86,000/mt ($1,178/mt) ex-Mumbai a week ago.
Most indicative of the downturn in the market were reports that several auto manufacturers have commenced re-negotiating their long-term supply contract terms, with steel mills seeking to adjust contracted supply prices in view of the planned production cutbacks caused by the shortage of imported components.
“As a customer-driven company, we are always ready to talk of any challenges they might be having in production. We will talk with our customers and take pricing decisions on a case-by-case basis as there are varying supply contracts without a large customer base,” an official with a government-run steel mill said.
“A rebate on the contracted supply price is on the table and decisions will be taken around mid-September,” he added.
$1 = INR 73.00