After touching a record 2.44 million tonnes (mn t) in July, 2020, exports from India are slated to touch around 1.65 mn t, lower by 32.37% month-on-month as per provisional figures available with SteelMint. Yes, the exports party seems to be over because domestic demand is not only on the rise, prices too are becoming more lucrative in the home-grown space.
Overall, from April-July, 2020, steel exports touched 7.81 MnT against 2.88 MnT in the same first four months of 2019-20, a more than 170% rise year-on-year. From April to June, there had also been an exponential jump in export volumes and around 60-65% of this quantum had been going into China but which subsequently decreased.
India usually consumes around 25 mn t of steel in a quarter but as per SteelMint data, the country, from March till August 2020 has consumed around 25 mn t.
However, now, all the steel-consuming sectors are looking up. Auto, which had declined by 75% in the April-June quarter compared to the same quarter last fiscal year, is trying to come back. Construction, which had been completely stalled, will resume post-monsoon. Towards the end of the year, a lot of infra and construction projects get a push and there is the pressure of project closures etc. And that is good news because construction is the biggest steel consumer, at more than 50% share at a conservative estimate.
From January to July, exports amounted to around 10.45 mn t and India’s main exporting countries were led by China, followed by Vietnam, Nepal, UAE and others. China’s imports from India as per our data, amounted to 3.43 mn t over January to July, 2020 followed by Vietnam at 1.97 mn t, 0.66 mn t to Nepal, 0.53 mn t to the UAE and 3.43 mn t to other countries.
China typically used to export around 5 MnT a month and would also import from Japan and South Korea – the dominant trading partners. Due to the slowdown, exports from these countries were affected and there was a gap in the Chinese market which could be exploited. Domestic demand in China picked up really fast after the lockdown.
And items that were exported included finished flats, finished longs, and semi-finished or billets. We have also noticed that it is mainly finished flats that have found the most takers in India’s export markets. Over May to July, finished flats exports were at 3.71 mn t whereas finished longs were at 0.45 mn t and billets were at a substantial 2.86 mn t.
Prices, which are a function of demand and supply, have also gone up twice in the last one month in the domestic market, making it more lucrative. The mills are now getting better prices compared to what they were fetching through exports. In fact, if mills were earning INR 4,000-5,000 per tonne more in the domestic market last month, the price differential between domestic and export prices are now around INR 6,500 to 7,000 per tonne.
In rupee terms, domestic HRC prices have climbed to above INR 39,000 per tonne in August, 2020 from a low of INR 36,000 tonnes in June and domestic rebar prices were cruising at a little below INR 38,000 per tonne from a low of INR 35,500 per tonne in July.
However, with the unlocking and now that the monsoons will be receding, domestic demand is increasing and prices are regaining lost ground
On the other hand, export prices of HRCs which were depressed at USD 429 per tonne fob in June, had climbed a little to USD 441 per tonne in July but were less lucrative compared to the domestic rate of USD 487/tonne in this same month. In August, export prices hovered around USD 500 per tonne against the far more robust USD 542/tonne domestic rates.
Export prices have been climbing steadily since April’s rock-bottom USD 380/tonne fob to USD 395/tonne in May to touch August’s elevated levels. And the reason for this is again high domestic demand, which has put Indian mills in a stronger position to command the higher export prices. The scenario is true not only in terms of India but other Asian HRC sourcing countries like Japan, Korea, Indonesia, Thailand etc.
Exports prices in September-October are likely to remain elevated but whether deals will be struck at these levels will remain to be seen.
Chinese prices have been retreating for the last couple of days. There is a bit of silence in South East Asian markets as well. Buyers are quite, but mills’ prices are hovering around USD 520-540/tonne fob. “Export prices are up because domestic markets across South Asian economies like Thailand, Indonesia, the Philippines etc are looking up, allowing these economies to up their export prices. Such a scenario bodes well for Indian steel makers, opening up home-grown demand opportunities. Thus, exports do look less attractive under such circumstances,” said a market source.
China too is lessening its imports. Again, the same reason why Indian domestic prices have gone up and accordingly export prices as well.
The gap between Chinese local and arrival prices from India for buyers in China have narrowed. Hence, there is less interest in Indian materials. Today, Chinese domestic prices are equivalent to USD 540-550/tonne cfr. Indian export prices are also at similar levels if offered to China. Previously, Chinese domestic prices were at USD 450/tonne cfr levels whereas Indian offers were at USD 430-440/tonne levels. So, there is no point in buying from India as Indian HRC prices attract an additional 3% import duty in China.
The article was written by SteelMint