The Indian mills’ steel exports trail, after seeing a high of 2.4 million tonnes in Jul’21, has become tepid across semis, flats and longs in the past fortnight or so.
In semis, the billets export market has been very silent for more than two weeks with several tenders getting cancelled. A tender for spot sale of 30,000 t of BF blooms was cancelled due to low bids and limited participation, while two more tenders for 25,000 t of billets and wire rod coils fetched a dull response. Another PSU mill floated a tender for 60,000 t of blooms asking buyers to quote for a minimum 30,000 t, such is the pressure to sell.
Export prices for the 2.5 mm, SAE1006 HRC, FoB east coast, dropped w-o-w to $902/t on 24 Aug’21 against the previous $911/t, against a distinct lack of active trade deals. These prices are even lower than the Russians’ $920/t FoB Black Sea levels.
Why are export volumes low?
South East Asian countries, especially Vietnam, are under Covid lockdown and not many deals are emerging from there. Vietnam especially is a heavy buyer of Indian flat steels but its own domestic demand has dropped sharply because of the lockdown which has been extended beyond Aug’21.
In fact, most of Vietnam’s own mills, desperate to sell inventory, are scouting the export markets themselves, offering at competitive prices. Recent billet deals to the Philippines were $10/t lower at $630/t FoB Vietnam while Hoa Phat’s billet offers were heard to be lower by $40/t w-o-w recently. Vietnam’s steel exports in Jul’21 are up 55% y-o-y.
Indian mills have exhausted their European quotas for the entire year. They exported 7% more at 2.67 mn t, mainly flat items, against the maximum 2.50 mn t in the very first five months of the current year. The bulk of these cargoes had been booked in Apr-May’21 and SteelMint understands these were shipped till Aug’21.
Therefore, negligible volumes would be left for Sept ’21 shipments. Mills can continue shipping to Europe beyond their quotas and let the EU buyers pick up the extra 25% duty (which would still make the landed price of Indian steel cheaper compared the global prices) but they are wary of doing so since that might put them under the EC’s anti-dumping scanner.
The Chinese market, always displaying a voracious appetite, has gone cold. There have been no bookings for the last fortnight. Demand has declined because of Covid surge and vessel issues. China’s overall imports in Jan-Jul’21 dropped 15.6% to 8.4 mn t against 9.9 mn t in Jan-Jul’20 and this trend may sustain for some time.
“Trade has become sluggish out of China. Also, China is not buying that much,” said a source.
What are mills doing to offset low overseas sales?
Indian mills, however, are not sitting idle. They are booking to newer destinations like Turkey, South Africa, North America and Latin America.
In fact, some mills said they are currently comfortable with hot rolled coil (HRC) bookings to these fresh locations but the areas of concern are cold rolled coils (CRCs), colour-coated and galvanised. They are unable to meet their targets in these downstream items mainly because Europe, a major consumer of the same, is out.
If Jul’21 exports were led by Europe, Aug-Sept’21 would be spearheaded by newer destinations, as per SteelMint’s assessment.
Exports to Turkey are already up 114% to 0.17 mn t in Jul’21 compared to 81,000 tonnes in Jun’21. Sales to the US have risen to 19,000 tonnes in Jul’21 from a mere 2,000 tonnes in the previous month.
Outlook
Overall, Sept’21 export volumes may be less compared to July and August figures.
CRC, colour-coated and galvanised are a concern in flats with Europe and Vietnam out. Since no deals are being heard from China, mills would be under pressure to export longs and semis. A trader told SteelMint that the expected billet export prices may come down further in the next few days as China’s buying has slowed down since quite a few weeks.
Prices as on 9:00 IST, 30 Aug. d-o-d changes indicated against closing price of 27 Aug.
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