Global billets exports drop sharply 47% in Jan-Sept’22. What to expect in CY22?

• Russia-Ukraine volumes plunge
• China drags down total import volumes
• Billets export demand to be muted in the current year

Morning Brief: Global billet exports were recorded at around 17 million tonnes (mnt) in the first nine months (January-September) of 2022 (9MCY22) against 32 mnt in the corresponding period last year (CPLY), a drop of over 40% y-o-y, reveals data maintained with SteelMint.

The top three exporters were Russia, Iran & Japan.

Why did global billets exports decline over Jan-Sep’22?

• Russia, Ukraine volumes plunge: A key reason is the Russia-Ukraine war. In the pre-war period, CIS was very active in the billets trade and Russia was the largest exporter of this item last calendar, at 15 mnt, followed by Ukraine with 6.68 mnt. Russia and Ukraine combined exported almost 22 mnt of billets last year and 18 mnt over January-September, 2021.

However, this year has seen a significant drop in volumes from the warring partners. Combined January-September volumes are down a steep 63% y-o-y to a mere 6.66 mnt. Russia’s provisional volumes alone have plunged in 9MCY22 by 60% y-o-y to 5 mnt (12.44 mnt) and Ukraine’s by 69% to a mere 1.66 mnt (5.36 mnt).

Western sanctions on Russia and the Black Sea blockade have obstructed flow of commodities from these two countries. That apart, war-ravaged Ukraine is facing huge challenges in transporting material to Europe as well.

• Exports from India fall sharply: Export sales from India fell by around 58% y-o-y to 1.98 mnt in the period under review against 4.77 mnt in CPLY because of higher realizations in the domestic finished steel market, especially for rebar. There were bid-offer disparities in traditional ocean markets like Southeast Asia and China.

India was traditionally an active billets exporter to Nepal. However, this Himalayan kingdom shifted to sponge iron imports because of the increase in the melting capacities of mills there. This led to a drop in India’s billets exports to Nepal.

Billet imports drop 

Total global billet imports in 9MCY22 dropped against the CPLY.

• China imports less: The volumes were mainly dragged down by China, whose imports fell 51% y-o-y to around 4 mnt from 8 mnt in CPLY. China is not a habitual billets importer. However, an extraordinary situation had been created due to Covid last year because of which the Chinese government had offered fiscal stimulus, especially to the construction sector. This had resulted in extra demand for construction steel and led China to source billets from other geographies.

• Nepal’s import volumes halve: This Himalayan kingdom is highly dependent on exports but has been encouraging domestic production of late. Its billets imports more than halved to 0.42 mnt from 0.94 mnt in CPLY as it increased sponge iron imports from India due to a rise in its melting capacities.
• Tepid demand from SE Asia: Meanwhile, demand from the Southeast Asian countries remained tepid as recovery in construction activities lagged behind. Indonesia’s imports dropped to 2.36 mnt in 9MCY22 from 2.42 mnt in 9MCY21. Thailand’s dipped to 2.07 mnt (2.47 mnt) while Taiwan’s volume were lower at 2.69 mnt against 3.30 mnt CPLY.

Outlook

Steel demand globally is expected to remain subdued in the medium term at least. Worldsteel’s Short Range Outlook for 2022 and 2023 forecasts that steel demand will contract by 2.3% in the current year. Thus, billet export volumes in total in 2022 are also expected to remain lower than in 2021.