Edelweiss retained their positive stance on ferrous with Tata Steel with a target price of Rs 750 and is their top pick in the Metal space. Domestic HRC (Hardness Rockwell C) prices increased a further Rs 2,750/t (5%) on average compared to previous week. Regional prices were stable owing to thin trade volumes during New Year holidays, though CIS price rose a further USD 18/t (2%) compared to previous week. At current level, domestic prices are at 6% premium to imports from South Korea, but we do not envisage threat from imports as lead times are well into Q2 CY21. That said, price momentum could cease if Chinese export price continues to remain weak; Edelweiss will keep a close tab on the same.

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All eyes on China:

In the past two weeks, China’s export price has come off by USD 45/t (6%) mirroring a similar dip in the futures market. At this stage, Edelweiss do not see any reason to panic as downstream indicators remain stable and iron ore prices remain robust at USD 167/t. That said, the recent rise in covid-19 cases in North China has slowed procurement by downstream buyers in a few cities such as Shijiazhuang. Edelweiss will keep a close tab on developments in this regard.

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Domestic HRC prices have risen after major steel producers recalibrated their prices with the ones in the wholesale market amidst constrained supply. Despite domestic prices being at a premium of 6% to landed price of imports from Far East, Edelweiss still does not see immediate threat of imports as lead time extends well into Q2 CY21. Edelweiss will closely watch for developments in regional markets post activities picking up next week. Sustained growth in CIS prices and surge in CFR (Code of Federal Regulations) prices for other Asian nations infuses confidence that regional prices could increase further, thus restoring import parity. Edelweiss will keep a close watch on China where domestic prices have stayed range-bound after falling 7% in the previous week.