Posted on 21 Jun 2022
India's recent 15% duty imposition on steel exports makes shipments abroad less attractive and will bring down Indian steel exports by 25% on-year in the current fiscal year ending 31 March 2023 (FY23), says rating agency ICRA.
The rating agency, however, expects a 40% rise in semi-finished steel exports in FY23, Kallanish notes.
“India’s finished steel exports are expected to decrease by 25% on-year in FY23, with the decline likely to be more pronounced in highly competitive markets like Southeast Asia and the Middle East compared to Europe, where export offers typically are higher,” says ICRA. “However, with semis being kept out of the ambit of duties, export of semis is likely to witness a significant increase of 40% on-year in the current fiscal as other finished steel categories wage the impact of a large export duty.”
“Steelmakers are also exploring the possibility of switching to the export of value-added/ alloy steel categories which are out of the ambit of duties,” it adds.
Moreover, ICRA expects operating profit at mills to reduce significantly in FY23, by 40-50%, on prevailing sluggish sentiment and rising feedstock costs.
“The steady rise in coking coal costs had started to nibble at the margins of steelmakers even before the export duty was announced,” says ICRA senior vice president Jayant Roy. “Therefore, we have seen the consolidated operating profits/tonne for the four leading domestic steelmakers coming off by around $110/t in Q4 FY22 compared to the high-watermark of $326/t recorded in Q1 FY22.”
“With domestic hot rolled coil prices correcting by around 9% since the imposition of the export duty, and with coking coal consumption costs poised to spike by around 30-35% quarter-on-quarter, notwithstanding the correction in domestic iron ore prices, the industry’s operating profits are expected to sequentially decline by $80-90/t in Q1 FY23,” Roy continues.
“While the margin pressure is likely to persist in the seasonally weak second [fiscal] quarter when steel prices would remain under pressure, the correction in coking coal spot prices by 27% in the last three weeks augers well for steelmakers’ second-half margins when demand conditions improve,” Roy concludes.
Source:Kallanish
