Posted on 03 Mar 2022
Indian steel producers and sellers are expecting increased exports to Europe and higher steel production costs with the possibility of tighter steel and coal supplies because of the Russia-Ukraine conflict.
A cargo of hot-rolled coil was sold by an Indian steel mill to a trading firm at $1,060 cfr Europe this week, $100/t higher than prior to Russia's invasion of Ukraine on 24 February.
Russia and Ukraine are among the top five global net exporters of steel, with the majority share of their exports heading to European countries. Sellers in India are seeing increased enquiries from buyers in Europe as Ukraine's steel industry is practically suspended, while sanctions on Russia has put trade with it at risk. India's finished steel exports were 11.14mn t in the April 2021-January 2022 period, up by 26.1pc from a year earlier. Vietnam was the top buyer, accounting for 12.5pc of the shipments, while Italy accounted for 9.8pc.
"Even after the war stops, it will take at least two months for markets to stabilise and we will see higher steel prices," said Indian producer JSPL's managing director VR Sharma.
India's steel exports to Europe are limited by the EU's steel safeguard quotas. But some participants are optimistic that EU may relax these. "Other countries might not be able to fulfil the quotas for the upcoming quarter and that can be shifted to India," a senior steel company official said. A steel trader from India said that any changes were only likely to apply from July.
"India has been silent in the exports market over the last few days amid the uncertainty and because their export orders are booked until mid-April," a second trader said, adding he expects offers from India to emerge for southeast Asian and Middle East markets next week.
Some market participants also raised concerns about vessel availability and delays in arrivals to Europe.
"The estimated time of arrival for some of our cargoes that are already on the water has been pushed back by 10 days. This may be due to Black Sea cargo diversions and congestions," the first steel trader said.
Two Indian iron ore pellet producers also highlighted tight vessel availability as a factor why they were unable to conclude deals following enquiries from European buyers.
"All the exports towards the Black Sea region are stuck. Vessel owners will not take the material there immediately, so eastern Europe is completely locked out and even if India wants to export more to Europe, it will be difficult," said the head of steel exports at a producer.
India shipped 74,000t of finished steel to Romania during April 2021-January 2022. The bulk of India's steel exports are destined for western European markets.
Steel producers in India are also facing cost pressures because of rising metallurgical coal prices, with pulverised coal injection (PCI) grade cargoes expected to firm with the sanctions on Russia. The country accounted for 20pc of India's PCI imports in 2021. PCI provides a supplemental carbon source in a blast furnace and is preferred by mills as it reduces costs by nearly half. A kilogram of PCI can typically replace 0.9kg of metallurgical coke.
The Argus premium hard low-volatile coking coal cfr India index was $484/t on 1 March, which was a historical high on tighter seaborne supplies. India is seeking ways to cushion itself against supply disruptions from Russia.
India had been looking at Russia to diversify its coal resources, although Australia remains the main supplier.
Source:Argus Media
