- India’s galvanised and colour coated steel exports surge 247% in 2021
- Import demand from Europe a boon for Indian exporters
- Covid-induced lockdowns led to supply vacuum in Europe
- European mills’ focus mainly on automotive steel pushed GI end-users to import
- Korea’s strict quota restrictions regime offered Indian mills further opportunities
- High raw materials costs influencing export prices
- Outlook bullish at least till April
India’s galvanised iron (GI) and coated steel exports showed a mammoth 247% y-o-y jump in 2021 to 3.61 million tonnes (mnt) against 1.04 mnt in 2020. Data maintained with SteelMint reveals, the volumes were pushed up by Europe, where these were primarily shipped. Belgium was the highest importer at 1.01 mnt, a y-o-y rise of 432%, while Italy was second with 0.55 mnt, up 686% y-o-y. Volumes to the UK were at 0.34 mnt and Poland, at 0.29 mnt (up 625% y-o-y).
Factors that supported exports surge in GI and coated products
Europe mills’ focus on automotive steel: Overall demand was high in Europe last year. However, the domestic mills there concentrated more on auto grade steel rather than commercial grade. This left domestic demand for GI and coated products unmet from local mills and end-user industries had no other choice but to import.
Turkey not first choice: The import demand was met primarily by three countries – South Korea, India and Turkey. However, there was a buzz that EU might slap an anti-dumping duty on Turkey which made European end-users wary of buying too much from Turkey. Data maintained with SteelMint showed that Turkey’s flat steel exports dropped 7% in Nov’21 while Jan-Nov’21 exports rose 9% y-o-y. GI showed an 11% drop in Nov’21. This left European buyers with mainly South Korea and India, both of which operate on an export quotas structure.
Korea’s strict quota system: However, Korea has a very strict regulatory system in place whereby export licences are issued to suppliers to negate the option of overshooting the allocated quota.
India, on the other hand, has no mechanism to restrain overshooting of the same. Hence, Indian mills exhausted their Europe quotas in the first five months of 2021 and the balance volumes attracted a 25% safeguard duty on the buyer’s account.
Europe prices were lucrative: Last year, demand was high and supply less, which led to an upturn in prices in Europe. The last three years’ data reveals that there were very limited number of suppliers to Europe from India. These were primarily JSW Steel, Essar Steel, (currently AM/NS India), and Uttam Galva. However, with demand for galvanised and coated exploding in Europe in the past few years, many other Indian players were galvanised into action. “Whichever mill had a presence in galvanised and galvalume, started exporting, lured by the lucrative prices realised from Europe,” recalls a source, adding, “From just three players, there are around 11 today”.
In mid-May’21, the SteelMint HRC index had peaked to $1,060/t when domestic HRC prices, ex-Mumbai hovered at INR 65,000/t ($867/t).
Supply in Europe impacted by Covid: Supply in Europe was also impacted last year by the pandemic. Many blast furnaces temporarily went out of production due to lockdowns, which created a vacuum in terms of supply. The remaining operational mills focused mainly on automotive steel.
China factor
China had withdrawn its export rebate of 13% on various steel items, including hot rolled and GI. However, its role is somewhat limited where Indian flat steel exports are concerned, because its presence in Europe is restricted. China is relevant to the extent that it sets price benchmarks globally, even in Europe.
Europe has country-specific quotas and China exports only automotive steel and that too in limited quantities through long-term contracts. China does not have any role to play in commercial grades exports to Europe, informed a well-placed source.
Way forward
The first quarter of the calendar is looking good in terms of exports to Europe. Buyers are still actively looking to import. Marketmen took time to settle down over the first three weeks of January. But there has been a surge in inquiries since the last 20-odd days for HRC, CRC and coated categories. The January price momentum has to gain further in February, says a source in a leading Indian mill. The first 10-odd days of February have seen a rise in coated offers by $50-60/t to over $1,100/t FOB.
Import demand for flat steel is expected to be good till April since inventory levels are “pretty low” in Europe, informed a source, with the economies there resuming to full capacity.
Of course, the upward price momentum is not just due to good demand emanating from Europe but two other key reasons as well.
One is the cost push from raw materials, which has increased manufacturing expenses. In coated, the energy and zinc costs have pushed up cost of production by $45/t and for HR items by $20-25/t over the last one month.
Secondly, China is still showing strong demand post-return from the holidays. If this sustains then there will not be a drop in prices in China which will influence global and Indian export offers.
If such forces are still in play, Indian mills can further hike export offers by around $50/t in the short term.
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