Indian IF based billet producers explore the export market as prices drop to a 1.5 month low

• Indian billet (IF) prices dropped by over INR 4,400/t ($61/t) in the last 15 days
• Spread between BF and IF export prices widen significantly, making room for exports

The secondary Indian mills have turned active in the export market on sluggish domestic demand. Since the beginning of Jan ’21, the domestic billet prices have started going south. For instance, SteelMint’s IF route billet index exw-Raipur, during 04-23 Jan ’21, dropped by INR 5,550/t ($76/t) from INR 40,900/t ($558/t) on 04 Jan ’21. As a result, the mills have turned their focus towards the export market, SteelMint understands. The IF route prices dropped to a 1.5 month low. The like levels last seen were in the second week of the Dec ’20.

“Yes, Indian secondary mills, based in Eastern and Central India, are actively exploring opportunities for billet export after a continuous price drop in domestic prices. Counter bids are reducing every day as global billet prices too have come down significantly tracking scrap prices”, SteelMint learned from traders.

Meanwhile, a leading Central India based steel mill reported having booked 2,400 t IF grade billet (130*130mm) for Sri Lanka at $530/t on FoB India basis. However, we are still confirming this deal with our other reliable sources. During conversations with a market participant, SteelMint learned- the billet export offers from the Western coast of India was at $525/t, FoB Kandla. Another Eastern India based leading steel mill was heard having an export allocation of 25,000 t billets.

Although there is a significant drop in the IF route export offerings, mills are still getting better price realizations in the export market. SteelMint’s IF route billet index exw-Raipur was seen at INR 35,350/t ($485/t) on 23 Jan’21. While, export offering from Central India is roughly $530/t, FoB ($505-510/t exw).

SteelMint Analysis

Sluggish domestic demand, supported by high BF-IF route price spread led the secondary mills to increase their export allocations. However, we feel that the continuous falling global scrap prices will not let them enjoy the price realizations in the export market. It (falling global scrap prices) will create bid-offer disparity and could result in cancelling the deals. Notably, we heard more about the offerings, but the contracts witnessed were limited.

Outlook: Domestic billet prices in India’s secondary segment are likely to find support if the mills are able to push some volumes for exports, considering price realizations in exports are still higher than in the domestic market. Hence this may prevent prices from falling further.

India’s billet export shipments witnessed a three-fold rise in CY ’20 to reach 6.42 mn t, amid increased buying from China and SE Asian countries. China remained the largest destination with volumes of 3.09 mn t followed by Nepal (0.95 mn t), Indonesia (0.45 mn t), Sri Lanka at 0.28 mn t, and others. According to our analysis, India’s 75-80% billet export shipments are of BF route, while 20-25% are of the IF route.