Posted on 27 Sep 2021
Indian steel mills anticipate exports to rise in the fiscal year ending 31 March 2022 (FY22), mainly on the back of China’s restrictions on production and exports.
India’s finished steel exports clocked at 10.78 million tonnes in FY21, against 8.3mt in FY20. The nation imported 4.75mt of finished steel in FY21, Kallanish notes.
“While subdued domestic demand during Q1FY22 was a factor behind the spurt in exports, China’s production curbs … and its accommodative policy for imports of semis and scrap are expected to keep India’s steel exports at elevated levels. We expect net exports to rise at 8mt in FY22 compared to 6mt last fiscal year," says ICRA vice president Priyesh Ruparelia.
“Exports were up by 13% in April-August despite the high base of FY21, but steel spreads are expected to fall on-quarter, unless domestic demand improves in Q3,” he adds.
“Assuming spot coking coal prices of $379/tonne to continue till October, the average cost of coking coal would increase by $140/t in Q3 compared to Q2, this will translate into a cost increase of INR 8,300/t ($112.36/t) … Iron ore prices have reduced only by INR 1,200/t in Q2 FY21 and may not fall much in Q3 due to expected supply tightness in Odisha," Ruparelia concludes.
China is focusing on de-carbonisation by reducing its crude steel production. Instead of producing crude steel, Beijing is eyeing semi-finished steel imports. Indian mills are heard offering billet at $710-720/t cfr China.
“China has decided not to melt too much iron ore or use it in their blast furnaces, and to import more semis,” Jindal Steel & Power managing director VR Sharma told Bloomberg. “We are getting more and more inquiries for billets, blooms, pig iron and direct reduced iron from China.”
China property developer Evergrande’s inability to service its $300 billion debt has caused panic in global markets. The Indian steel industry, however, believes that Evergrande’s debt will not affect Indian steel manufacturers as domestic firms do not cater to the Chinese market.
“China is a large economy and the ripples of Evergrande will only be felt within China, not outside. Besides, China is not our market. Our prime market comprises the customers of China – Southeast Asian countries like Indonesia, Malaysia and Thailand, Australia, and West Asia. This market is readily available to Indian companies,” Sharma concluded.
Source:Kallanish
