- Steel exports reach almost 21 mnt last fiscal
- Flat steel’s share highest, driven by EU demand
- Billets exports dip as China’s buying recedes
- Turkey, UAE are emerging export destinations, contribute significantly
- Exports may remain on higher side, in medium term at least
Morning Brief: Indian steel exports hit an all-time high of more than 20.50 million tonnes (mnt) in financial year 2021-22 (FY22) against over 19 mnt seen in FY21, up 7% y-o-y.
In this volume the share of flats was the highest at 13 mnt, up 23% y-o-y. Overall, volumes were mainly propped up by exports of downstream products like hot rolled coils and plates, galvanized pipes and tubes and cold rolled coils.
Finished longs’ overseas sales rose a sharp 86% to 2.43 mnt in the year under review. However, semis (billets) dropped 30% in this period to 5.05 mnt (7.25 mnt).
Factors that pushed up India’s steel exports
- China’s export rebate withdrawal: A key reason that helped push up FY22 exports was China’s subdued exports activity in the second half of last fiscal on the back of the exports rebate withdrawals. It may be recalled, that from 1 May, 2021, China had withdrawn the 13% VAT export rebate on 146 steel products, including HRCs, wire rods and rebar and, again from August 2021, on CRCs, galvanized iron and silicon steel. Post-these moves, China’s exports started dipping from July 2021 onwards till November. The markets serviced by China, especially Turkey and the UAE, moved to India, especially for flat products.
China’s exports de-focus indirectly allows other exporting countries, especially India, to cash in on this trend since it was a large exporter of CRCs, galvanized, and colour-coated items to Latin American nations. These markets shifted to India post-China’s withdrawal of exports rebates.
Moreover, the production cuts in China encouraged downstream usage of domestic material.
- Pent-up post-pandemic demand from Europe: The export volumes were mainly driven by Europe. The post-Covid reconstruction in Europe continued which necessitated a demand for material from India. Natural gas shortage and its prohibitive pricing kept many steel mills in Europe in temporary shutdown mode, creating scope for imports from India, especially for CRCs, required in automotive and consumer durables.
In fact, steel exports to Europe rose 76% in FY22 to 5.71 mnt against 3.35 mnt in the previous fiscal. Italy and Belgium alone commanded 3.25 mnt. Indian mills, in fact, had exhausted their annual flat steel quota for CY21 in the very first five months of last calendar, propelled by higher margins. Europe’s domestic prices were higher by Euro 80-195/t compared to Indian mills $1,000/t CFR offers at that juncture. The total 1.13 mnt of flats quota over January-June, 2021 was exceeded manifold.
Europe is essentially a flats market and the numbers prove India’s key role here. In India’s total exports, flats contributed almost 64%, while Europe’s overall share was around 28%.
- Turkey, UAE emerge as key importers: These two nations are emerging exports destination for India, essentially because they buy from India, value add and then sell to Europe. As a result, Turkey’s imports from India skyrocketed from a nominal 48,000 tonnes in FY21 to 1.27 mnt in FY22. Similarly, the UAE’s imports spiralled up from 0.99 mnt to 1.34 mnt in this period. Thus, Indian mills indirectly also sold to the Continent via these two destinations, especially after exhausting their quotas.
Vietnam sees drop in imports
This South East Asian country, a habitual buyer from India, saw imports dropping over 35% to 1.18 mnt (2.38 mnt), mainly because of its Covid lockdowns from July-September, 2021. Moreover, Vietnam’s domestic steel production was up 19% in 2021, which encouraged use of home-grown steel by the downstream sector.
Billets exports drop on lower Chinese demand
India’s billets exports dropped 30% to 5.05 mnt (7.25 mnt) essentially on lower buying by China. The latter is not habitually a huge steel importer. However, in 2020, government-induced stimulus measures – especially to the construction sector, post-Covid, led to a surge in demand, which necessitated billets imports, a move that had worked to India’s advantage. Also, China’s overall production cut drives kept imports low.
Outlook
India’s steel exports will remain buoyant, going forward, mainly supported by the Russia-Ukraine war. SteelMint’s data reveals that Russia exported around 9 mnt steel to EU and Ukraine, over 6 mnt. However, even if the war were to stop tomorrow, demand in Europe from Indian mills will continue, at least for another six months, based on a few reasons. One, Ukraine’s mills have been badly hit and will need to be reconstructed, which will take time. Secondly, most Ukrainian mill workers have relocated to safer locations and will require time to return, and resume duties. Thirdly, Ukraine will require its steel to rebuild itself and have little surplus for exports. Lastly, sanctions on Russia may continue for a longer period. These factors will keep the EU ordering from India, at least in the medium term.
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