Posted on 26 May 2022
The recent imposition of duties on Indian steel exports has disturbed the overall dynamics of the country’s steel industry. From steel mills to traders, everyone is shell shocked, imploring authorities to rethink the move and allow for a grace period to process orders signed before 21 May. Mills have withdrawn hot rolled coil export offers for the time being, sources tell Kallanish.
“No offers were made from India this week; everyone is analysing the impact of this decision,” says a trading source. “They are requesting the government to at least allow them to process the orders for which LCs have already been generated.”
Mills are also working on other options to survive in the export market amid the export duties. These include adding a small quantity of boron and exporting product under a different HSN code that is not levied with duties, multiple sources echo. “A few mills are also eyeing to start exporting value-added slab,” one source opines.
Even if mills add boron and change HSN codes, selling alloy-grade HRC to Europe will be a challenge for them.
Before the announcement, offers to Europe were noted at $950-960/tonne cfr southern and northern Europe, equating to $830-840/t fob India for the majority of Indian mills, depending on spot market freight. Offers to the Gulf Cooperation Council (GCC) and Vietnam were meanwhile heard at $850-860/t and $790-800/t cfr respectively. However, none of these quotes are now valid after being withdrawn by mills.
Considering the export duties of 15% on fob values, last week's offers of $830/t fob India would translate to $954/t fob India, which will be far higher than the competition’s cfr quotes to Europe. Apart from the export duties, mills are also facing the burden of costlier coking coal, which is making it yet more difficult to roll out workable offers to buyers.
The main idea behind the tax imposition was to control domestic steel prices, after costs were badly impacted in the construction and automobile sectors. Prices have surged by almost 45-50% against the government’s projection of 5-10% in the planning phase.
“India is not China,” says another source. “The idea was to control prices, as the surging prices were damaging government projections for infrastructure projects; the moment they see the prices are cooling off, they might drop the duties.”
Domestic HRC traders were silent on Wednesday, with offers in the domestic market heard at INR 65,000/t ($838) ex-Mumbai. Traders were possibly panicking because of the sudden fall in prices.
Source:Kallanish
