Europe is turning out to be a spot of bother for Indian steel mills. New fourth quarter (Q4, Oct-Dec’21) safeguard import quotas became available for the European Union (EU) market from 1 Oct’21. If the mills were eagerly waiting for Europe to inject a dose of excitement into their sluggish export bookings, things may not turn out as per their expectations.
What are the hurdles to exports to Europe?
- Exhausted EU quotas: EU importers have already exhausted their Q4 Indian HRC quotas. Data available with SteelMint show that the Customs registered quota volumes for hot rolled coils (HRCs) on 1 Oct’21 were at 1.82 lakh tonnes while the actual quota available is 1.70 lakh tonnes. For cold rolled coils, the Customs registered figure is 1.22 lakh tonnes but the actual available quota is 1.51 lakh tonnes. In the case of hot-rolled plates, the figures are 0.66 lakh tonnes and 0.50 lakh tonnes respectively and for HDGI, and “others” at 1.24 lakh tonnes and 4.40 lakh tonnes respectively.
However, a reliable trade source informs that these are estimates and the actual Customs registered numbers are higher at present as this information pertains to 1 Oct’21. It is heard that CRCs have climbed to 1.40 lakh tonnes as on 5 Oct’21 against 1.22 lakh tonnes on 1 Oct’21.
In contrast, China’s Customs registered quotas for 4B are 78,000 tonnes against the available 1.19 lakh tonnes.
“Indian hot rolled coil volumes awaiting clearance at European ports have already exceeded the available quotas. Other product categories are also expected to fill up rapidly,” informs the source.
- No buying interest: The EU quotas on India are hurting sales considerably. “No interest from EU customers for Indian-origin products, especially flats,” says another source.It seems that even if a EU customer clears the new quotas on 1 Jan’22 for products like hot-dipped galvanised (HDG) and CRCs, they still believe the quota will be filled up so quickly that they will have to pay a pro-rated duty of minimum 10%.
- Consignments delay: A substantial volume of material from Indian mills is still in transit to Europe. However, the cargoes are experiencing delays of several weeks and severe logistical congestion at ports, inform source. Once these consignments are cleared, only then fresh bookings will take place.
- Indian offers steeper: Indian flat steel offers, at S1,160-1,170/tonne (t) CFR levels (euro 1,000-1010 /tonne) are high compared to what other countries are proposing. For instance, Turkey’s CRC offers are at euro 950/t which seems to be the best for EU importers and they do not have to pay a safeguard duty.
Local EU CRC prices are hovering around euro 1,230/t. “Most likely, CRC is the product which filled up the quickest this year for all four quarters. But, Indian mills’ prices are somewhat higher than what Turkey is offering,” says an overseas source.
The source adds: “If Indian mills want to sell CRCs in Europe, they will most likely have to drop prices by a minimum $80/t and/or hope that other origins would increase prices, including EU mills!”
India’s flat steel exports
India’s total flat steel exports over Jan-Aug’21 were at 9.17 mn t, in which the quantum sold to Europe comprised 4.73 mn t. Within this volume, the share of CRCs was 0.68 mn t and HRCs, 2.29 mn t. HR plates were at 1.61 mn t. However, CRCs have more than doubled from a little over 62,000 t in Apr’21 to 0.14 mn t in June, 0.13 mn t in July and 0.15 mn t in August, unlike other categories which have remained range-bound in these months.
Total steel exports over Jan-Aug’21 were at around 15 mn t.
Outlook
SteelMint’s assessment is that Indian mills will not get immediate access to the European markets, a factor that would lower CRC prices, narrowing the gap with HRCs. It may be noted that the price spread had widened essentially because CRC prices had ballooned only because of exports to Europe in large volumes.
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