India’s steel exports in the Jan-Mar’22 quarter will likely amount to over 4 million tonnes (mnt), SteelMint understands, based on the booking and shipment volumes recorded. In the Oct-Dec’21 quarter, volumes had touched around 3.6 mnt, data reveals. Thus, on a q-o-q basis, exports may see a 10-15% growth.
In January, exports touched 0.96 mnt. However, booking and shipment indications reveal that volumes for February and March will be higher. As per data, sizeable bookings happened in January-February, particularly in hot rolled coils (HRCs) and plates. Most of these went to the European and Mediterranean regions, as well as to Turkey and Egypt. In fact, the latter emerged as a new destination for Indian billets. January HRC export volumes touched 3.15 lakh tonnes.
Reasons for increased exports to above geographies
- Natural gas shortage: A key reason is the natural gas shortage in Europe and the Middle East. The supply crunch in natural gas and the consequent spiralling prices led to an energy crisis in these regions which forced many steel mills to either opt for temporary closure or production cuts – a scenario that forced the downstream (steel users) segment to sharply escalate their import volumes.
- Russia-Ukraine standoff: Russia and Ukraine are two leading steel exporters globally. The former is the third-biggest with total exports at almost 27 mnt in 2020, in which billets comprised the highest share at 13 mnt, followed by finished flats at 10 mnt and finished longs at 4 mnt, as per SteelMint’s data. However, the market buzz is buyers, impelled by the present geopolitical tensions, are scouting for more secure and sustained sourcing countries like Indian and Southeast Asia.
Turkey key importer in Jan-Mar: Russia and Ukraine supply mainly to the European Union. However, the escalating geo-political tensions between these two nations are fuelling uncertainty over trade especially since EU is ready to impose sanctions on Russia over its recognition of Ukraine separatist regions. EU buyers, uncertain over supply of finished steel from Russia and Ukraine, are turning towards Turkey, which is geographically closer, especially for sourcing HRCs, CRCs, galvanized and other flat products. Turkey’s increased exports have created a void in domestic supply, driving up imports of flats from India. Import volumes in January were at over 65,000 tonnes. Market players inform that most of India’s shipments in January-March have been booked for Turkey, corroborating that this country is evolving into a major export destination.
Lesser bookings for longs: Bookings also indicate that longs’ share is not as high as in the past few quarters. The reasons are two-fold.
First, January-March is traditionally the peak domestic demand season for Indian mills since government infra projects, staring at completion targets, get galvanized into buying. Mills keen to cater to home demand, reduce export allocations.
Secondly, apart from Nepal, a traditional market, few other countries showed lesser inclination for Indian longs, including China, limited by its production cuts and price disparities. In any case, China is not a habitual buyer of billets from India.
But, longs were mainly exported to Egypt, whose iron and steel sector has been impacted by the gas shortage. The gas crunch led to gas prices rising which pulled up power tariffs, increasing the cost of steel production. Mills here, instead of melting scrap, are buying semi-finished and rolling these into rebar for cost competitiveness.
Outlook
However, global factors will continue to influence future bookings.
The gas crisis is expected to start resolving from March onwards when winter heating requirements in the EU starts easing somewhat.
However, a question mark remains over the Russia-Ukraine crisis, which would have a cascading effect on the global steel trade but benefit India.
China, on the other hand, is expected to increase its crude steel production post-Winter Games, with an eye on its own GDP growth. It is expected to return to the exports market with commercial grades, which may create stiff competition for Indian exporters.
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