India: Rebar price recovery gains momentum even as HRC-rebar spread reaches over 3-year high

• • Infrastructure bookings strengthen rebar demand

• • Leaner inventories restore pricing discipline

• • Rising coal and coke costs reinforce rebar price floor

Morning Brief: India’s steel market may be approaching a key inflection point after the spread between hot rolled coil (HRC) and blast furnace-route rebar widened to a 42-month high of INR 8,800/t in July. The divergence, driven largely by a sharp correction in long steel over the past two months, is showing early signs of reversing as infrastructure demand improves, inventory pressure eases and rising production costs strengthen the floor for rebar prices.

While HRC prices are expected to remain broadly stable, improving fundamentals in long steel suggest the next phase of adjustment could come through rebar outperforming flat steel rather than a sharp correction in HRC.

HRC-rebar spread widens to multi-year high:

BigMint assessment data shows the HRC-rebar spread widened from INR 700/t in May to INR 5,800/t in June before reaching INR 8,800/t in July, marking its widest level in 42 months. The differential expanded by INR 8,100/t in just two months, moving from near parity to a level that many market participants increasingly view as a cyclical extreme rather than a sustainable pricing relationship.

The widening reflected a much sharper correction in rebar than in HRC. Long steel came under pressure from aggressive competition from lower-priced induction furnace-route material, elevated distributor inventories during June, monsoon-related disruptions to retail construction activity and predominantly need-based buying. HRC, by contrast, remained comparatively resilient as balanced domestic availability, firm mill offers and the absence of surplus spot supply limited downside in flat steel prices.

Infrastructure demand begins to absorb supply:

The strongest shift in market dynamics has emerged from the project segment.

As rebar prices corrected sharply, engineering, procurement and construction (EPC) contractors and infrastructure buyers accelerated purchases to lock in lower prices. Market participants reported active bookings at INR 48,000-49,000/t landed, while some earlier transactions were concluded at around INR 46,500/t.

Industry sources indicated that confirmed project orders have exceeded 300,000 t, with nearly 70% of August project allocations already booked. Infrastructure and institutional projects continue to absorb the bulk of primary rebar volumes, improving production visibility for integrated mills and reducing their dependence on spot market sales.

A western India-based trader said large project buyers used the correction to secure tonnage, after which mills became noticeably less willing to negotiate aggressively.

Inventory and cost pressures support rebar:

Inventory conditions have also improved since June, with market participants reporting leaner trader stocks, stronger project dispatches, tighter spot availability and selective replenishment replacing widespread destocking. The gradual shift towards controlled inventory rebuilding is improving market sentiment while restoring pricing confidence across the supply chain.

At the same time, rising production costs are strengthening the downside floor for blast furnace-route rebar. The definitive anti-dumping duty on low-ash metallurgical coke imports is expected to increase coke procurement costs over the coming months.

Although seaborne coking coal prices have softened recently, the effective coal-and-coke cost environment remains firmer than previously anticipated, reducing the incentive for integrated producers to pursue further price cuts.

Primary producers have already responded by increasing August rebar list prices by INR 1,000-2,000/t, while project offer prices have moved above the lows recorded during the recent correction, suggesting the market is transitioning from stabilisation towards gradual recovery.

HRC likely to remain rangebound:

Unlike rebar, HRC is expected to remain broadly stable over the near term. Domestic prices continue to find support from higher import replacement costs, disciplined mill supply and balanced spot availability, while maintenance shutdowns have helped prevent oversupply.

Although export demand from the European Union, the Middle East and Vietnam remains moderate, less favourable import economics are expected to limit downside pressure in the domestic market. As a result, the adjustment in the HRC-rebar spread is increasingly expected to occur through stronger rebar performance rather than a significant decline in HRC prices.

Outlook:

The July HRC-rebar spread increasingly appears to represent the peak of an unusually wide cyclical divergence rather than the beginning of a new pricing regime. Factors such as high inventories, weak retail demand, aggressive discounting and inventory liquidation, which drove rebar’s underperformance, are gradually easing, while infrastructure bookings, improving mill order visibility and rising blast furnace production costs are strengthening the market’s recovery prospects.

If project demand continues to build and inventories remain controlled, rebar prices could recover by around INR 1,000-2,500/t during August, while HRC is likely to remain broadly stable at prevailing levels. Under this scenario, the HRC-rebar spread could narrow towards INR 5,000-6,500/t over the coming weeks, with the next phase of the steel cycle increasingly favouring long steel after one of its deepest corrections in recent years.