India’s steel exports are expected to cross 2 million tonnes (mn t) in May’21 and again breach this figure in June’21, as per SteelMint’s expectations. Export levels in Apr’21 were at 1.6 mn t.
Factors pushing up exports
The estimated over-2 mn t of exports in each month of May and June, cumulatively adding over 4 mn t to the July figures, is backed by a few factors. One is the lockdown implemented across states, which has dented domestic demand, especially in the retail segment, driving mills to look for markets overseas. Consequently, the volume allocated for domestic sales has been diverted towards exports, it is learnt.
Secondly, China’s much-awaited export rebate cut, implemented on 1 May’21, played a huge role in boosting Indian mills’overseas sales. The markets serviced by China have been captured by Indian players – especially, Europe and parts of South East Asia.
For instance, longs exports (rebar and wire rods) are expected to be high in May and June, because, after the China rebate cut, Indian mills supplied the same to destinations like Hong Kong and Singapore. “Post-the rebate cut, the Indian material was perhaps more competitive or Indian mills were ready to provide immediate delivery,” a source observed. In June-July’20, amid the national lockdown, billets had been the flavour of the season.
Thirdly, export prices are high, offering the mills much higher margins, especially from Europe and other destinations. In end-May, domestic HRC and CRC prices remained discounted to international rates with Indian mills trying to reduce the gap.
Margins meatier
In the third week of May’21, SteelMint’s benchmark prices for 2.5 mm HRCs, ex-Mumbai, were at INR 65,000-66,000/t and CRCs at around INR 80,500-81,500/t. JSW’s domestic HRC prices were ruling at INR 66,750-67,000/tonne and CRCs at INR 82,500-83,000/t while AM/NS India’s effective HRC prices were at INR 68,000-68,500/t and CRCs at INR 82,000-82,500/t.
But domestic prices are still lower by INR 14,000/t compared to export offers ruling at $1,100/t CFR, to Vietnam and UAE for June-July shipments. CRCs, destination Europe, hovered around $1,400/t from Indian mills.
“Global prices are headed north. China’s reduction of the export rebate also led to higher exports from India. Thus, overall, exports should cross 2 mn t in May and June. The highest volume of exports, however, were recorded at 2.44 mn t in July’20. We will not be surprised if the volumes cross 2.44 mn t in either May or June,” emphasised a source.
Vessels availability an issue
The only red flag is vessel availability at present. Owners are unwilling to send their vessels to India because of the Covid surge. A trader informed that, consequently, deliveries are getting delayed at present. “We cannot put a number on the days of delay. It all depends on the shippers – whether they find a vessel or not, irrespective of destinations.”
But still that has not impacted steel exports in a major way, it is leant. SteelMint assesses that in May, exports may be hit by around 15% but will still remain above 2 mn t. Mills are already booked for June above targets.
“Mills are already covered till June and have plenty of time to book for July-Aug’21,” said a source.
Outlook: A quiet July
Whatever material is being offered at present is for July shipments. But, fresh bookings for July shipments have dropped on the heels of the fall in steel futures on the benchmark Shanghai Futures Exchange (SHFE).
“There has been no major activity in HRCs for the last 15-20 days. European buyers are concerned about the quota issue and, hence, not interested. Indian mills were expecting prices in South East Asia to go beyond $1,100 CFR but the sudden collapse in Chinese futures has mellowed the overall sentiment in SE Asia and other regions,” a trading source told SteelMint.
~Madhumita Mookerji
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