EU demand lifts India’s HDGI exports by 145% in FY22

• • Present inquiries low as buyers remain well-stocked
  • Indian offers drop but buyers still wary
  • JSW Steel Group highest exporter in FY22
  • Mills expect demand to resume in short term
  • Russia-Ukraine a key factor and to benefit Indian mills

Morning Brief: India’s hot dipped galvanised iron (HDGI) exports spiralled up by a whopping 145% to 1.95 million tonnes (mnt) in financial year 2021-22 (FY22) against 0.80 mnt seen in FY21, as per SteelMint’s data.

EU drives exports volumes
This stupendous rise was driven by procurement from European Union (EU) countries, mainly Belgium, Italy, the UK, Poland and Spain.

The strong EU demand was on account of post-Covid reconstruction as countries emerged from lockdowns, nursing pent-up demand. As per Eurofer data, in the second quarter of 2021 (April-June), EU’s steel-using sectors’ output grew at an exceptionally high rate (+29.2%), scoring the second increase in a row after the first quarter (+2.8%). This necessitated steel imports, especially of flat products, of which HDGI forms an important share.

Last year, the residual quotas which were not used up by many countries came to Indian mills, a factor that pulled up exports to the EU too.

However, data also reveals that in Q4FY22, exports of HDGI dropped around 41% to 0.22 mnt against 0.37 mnt in the same quarter in FY21. Although March 2022 volumes rose to over 96,000 tonnes (t) compared to a much lower 51,000 tonnes (t) in February 2022, driven by EU’s escalated buying in the face of the Russia-Ukraine crisis and the ensuing sanctions on the former.

Overall HDGI exports in FY22 to Belgium spurted by 100% to 0.68 mnt, while those to Italy surged a humongous 1000% to 0.30 mnt. Sales to the UK rose by 101% to 0.25 mnt and to Poland by 204% to 0.13 mnt. Exports to Spain were a moderate 91% higher in comparison to 0.13 mnt.

Metallic coated sheet quotas were at around 118,000 tonnes in January-March, 2022 and to over 119,000 t in April-June. In comparison, South Korea’s are at around 184,000 t and 187,000 t respectively.

“Galvanised quotas to the EU, excluding colour-coated, is 100,000 tonnes per quarter and, including colour-coated, at around 140,000 t,” said a mill source.

JSW Group leading exporter
The JSW Steel Group emerged as the highest exporter of HDGI in FY22, as per data, with a combined volume of 1.32 mnt, followed by AM/NS India with 0.47 mnt.

Present scenario
At present, however, enquiries have fallen sharply. A market source informed that coated products are finding it a challenge to find buyers in the EU at present. “UK-EU enquiries are drying up, putting Indian mills slightly in a spot of bother,” said a source.

Why is the market subdued?
EU buyers await domestic price drop: Because of the high prices in Europe’s domestic market, buyers there have moved to the sidelines, awaiting a downward correction. Domestic EU prices are being pushed up by higher production and energy costs, a spin-off of the Russia-Ukraine war. From logistics to ferro alloys, to coal, all costs are up. At present, procurement is need-based.

Overbooked: Equally pertinent to note that leading importers from India – Belgium, Italy, the UK, Poland and Spain – are heavily stocked and under no pressure to make fresh bookings, even if the Indian offers are lower than their domestic. Only after they deplete their current stocks, are they likely to resume bookings.

Falling market: No end-user is keen to book in a falling market. Prices of galvanized material of varied thickness have been down-trending since March, 2022, as per SteelMint data.

Pricing
A source informed that prices have dropped since the last couple of months to touch $1,250-$1,300/t FOB range for 0.50mm thickness material. “Any price is ok, we need volumes at present,” the source confided.

But sources revealed that there are hardly many buyers, despite the Indian/Asian offers being $100-200/t lower compared to Europe’s domestic prices.

Way forward
However, this year, the residual quotas of other countries have been consumed by the EU, thanks to the geo-political developments and Black Sea trade blockade. Thus, compared to last year, Indian mills may not expect any incremental quotas to come their way. The drop in HDGI exports in Q1FY23 may be 10-15% compared to Q4FY22.

However, Indian mills are upbeat that EU buyers will return to the market in the coming months. The April-June quarter is usually better because EU weather supports demand. Moreover, procurement has been subdued of late and once the inventory is exhausted, buying will resume.

The new quotas will open up from July, for which bookings start from May-June.

Where prices are concerned, EU’s domestic offers, pressured by lower overseas offers, may correct downward in the short term.

Taking a long-term view, a primary mill source said the Russia Ukraine war will be a factor. Both exported 1.38 mnt of galvanised in 2021 of which a substantial chunk went to the EU. Because of the sanctions on Russia, and the war-induced devastation in Ukraine, the EU will source a part of this volume from other destinations, including India.