News Room - Steel Industry

Posted on 14 Dec 2021

Indian steel exports drop to 9-month low; will mills be under pressure?

Indian finished steel exports have fallen to a nine-month low. Data maintained with SteelMint reveals exports dropped almost 29% m-o-m to 0.91 mn t in Nov’21 compared to 1.28 mn t in Oct’21.

In this corpus, the share of flats is at 0.52mn t, down 36% m-o-m. Finished long products have dipped 8% m-o-m to 0.12 mn t while billets have dropped 21% m-o-m to 0.27 mn t.

Data shows exports were relatively high, touching well over 1 mn t over Mar-May’21 because the country was in the grip of the second wave of the pandemic and domestic demand had fallen drastically.

What factors are bringing down India’s export volumes?

Import volumes from key importing nations have dropped although Nepal remained a steady buyer throughout the year.

• Europe demand dries up: Europe, in fact, is a huge factor behind India’s declining exports. It may be recalled, Indian mills had exhausted their European quotas in the first five months of the current calendar and the entire year comprised deliveries of those earlier booked shipments. Whatever deliveries are happening now are residual volumes of previous bookings. Volumes to the EU, which had hovered around 0.80 mn t over Mar-Aug’21, dropped sharply to 0.13 mn t in November and prior to that, to 0.19 mn t in October.
• China’s demand drops: China’s local prices dropped making imports unviable. As per a report, China’s HRC export average prices, after touching a high of $939/t in September, dropped to a low of $785/t in November. In CY’20, China had bought large volumes of billets from India. However, this year, factors like the production and energy curbs dented demand and real estate sector chaos brought about by the Evergrande collapse led to lesser demand for construction steel. India’s exports to China dropped 67% m-o-m in November to 0.50 mn t.

Other factors are also pulling down China’s imports. A source informed that north and north east China are witnessing record snow in the last 30 years, hampering logistics. Secondly, most of the power generated is being diverted towards household heating, leaving industry with sharp shortfall. Thirdly, the Lunar New Year holidays and Winter Games in February are putting a leash on industrial activity, slowing down downstream steel demand.

• Vietnam prefers Russian offers: This South East Asian country started importing heavily from May onwards, when volumes spurted 225% m-o-m to 0.14 mn t, touching a peak of 0.25 mn t in August. However, these started dropping steadily from 0.13 mn t in September to reach 0.06 mn t in November. It seems the 15% Russian export tax imposition from August spoilt Indian chances. Vietnamese downstream users booked huge volumes from the Russians at rock-bottom prices, whose effect was felt September onwards. For instance, Indian offers were at $890/t CFR against bids of $870/t CFR whereas the Russian offers had fallen to $850/t CFR in late September. “When Russian prices were $850-860/t CFR levels, Indian mills sought $900-905/t CFR. This was because domestic HRC prices were ruling at around INR 70,000/t. If they exported at the Russian prices, that would have translated into INR 64,000-65,000/t delivered, which would have rendered exports unviable at that juncture,” said a source.

Outlook

Mill-level inventories are rising because domestic demand is just about okay at present, pressuring mills to effect price cuts for December while exports have fallen dramatically.

A large mill has booked 60,000 t to the Middle East at $845-865/t CFR for early-Jan’22 shipments. This indicates the market is currently below $850/t CFR and, Indian mills, to compete, should come close to $800-810/t CFR into Middle East and Turkey while Vietnam would be below $800/t CFR in the short term.

Demand will be subdued in December and Q1CY’22, because Europe will be experiencing deep winter when commercial activity slows down. That apart, the chip shortage has negatively impacted automotive production, leading to lesser flats demand from auto OEMs.

Lastly, and very importantly, the Chinese government will open up export allocations from the new calendar which will impact Indian mills. Chinese steel export will probably sustain this year’s levels or go up if domestic demand stays weak. However, the first six months of CY’22 will possibly see Indian mills competing strongly with China. Additionally, the buzz is China will look at commercial grade exports too, not just value-added, and put further pressure on Indian exports. It is heard China is selling API grade HRCs to the Middle East at highly competitive prices.

Source:SteelMint