EU, Turkey prop up India steel exports in Jan-Feb

• Exports in Jan-Feb’22 up 16%
• Share of flats at overwhelming 74%
• Russia-Ukraine crisis keeps EU, Turkey hungry for alternate supply sources
• India steps in with prices higher but still cheaper than EU rates
• Tata, JSW Group, SAIL and RINL see an increase in exports, volumes from JSPL, AMNS drop.
• Recovery in demand from automotive keeps CRC demand high
• Demand trend expected to continue into short term

Morning Brief: India’s steel exports are still being spearheaded by the European Union (EU) and Turkey, reveals provisional data from SteelMint.

Total exports in Jan-Feb’22 rose16% to 2.31 million tonnes (mnt) against 1.99 mnt seen in the same two months of the previous calendar of 2021. On a m-o-m basis, exports were also up 16% in Feb’22 at 1.26 mnt against 1.08 mnt in Feb’21.

In the total two-month volume of 2.31 mnt, the share of Europe was a leading 22% or 0.52 mnt. It may be recalled that in 2021 too, the EU had hogged the limelight with 6.15 mnt or 30% of the total 20.64 mnt of exports.

Exports highlights

• In the total volumes over Jan-Feb’22, flats comprised an overwhelming 74% at 0.94 mnt against 0.14 mnt of longs and 0.18 mnt of semis (billets).
• HRC/plates exports are up 78% m-o-m in February.
• CRC exports doubled m-o-m in February to over 63,300 tonnes compared to 35,560 tonnes in January thanks to rising automotive demand.
• But rebar exports continue to drop on no active buying interest from Hong Kong, Singapore and competitive offers from the Middle East.
• Tata, JSW Group, SAIL and RINL witnessed an increase in export volumes. However, those from JSPL, AMNS fell sharply.

Factors pulling up EU, Turkey imports

• Russia: Ukraine catalyst: The Russia-Ukraine war has acted as a catalyst for Indian mills. Russia exported around 30 mnt of steel in 2021 out of which finished flats comprised almost 11 mnt, finished longs 4.34 mnt and billets almost 15 mnt.

Ukraine exported around 15 mnt from its total production of around 21 mnt. In this, the share of flats was at almost 7 mnt while longs exports comprised 1.92 mnt and semis 6.77 mnt.

Thus, overall, supply of nearly 18 mnt of flats, over 6 mnt in longs and over 21 mnt of semis are getting disrupted by the war in the face of the sanctions imposed by western powers on the two warring nations. The overwhelming volume of Russia and Ukraine’s exports went to the EU and Turkey. Naturally, both these geographies are now frantically scouting for alternate sourcing countries, and India is playing the role of a key supplier here.

• Lure of higher margins from EU: The EU is a lucrative market for Indian mills. Recent deals show prices rising with each successive deal clinched. For instance, deals were sealed at $1,200/t-$1,250/t CFR Europe lately. In comparison, domestic HRC offers, in dollar parity, rest at around $933/t at mill-level. In Europe, mills have announced another steep hike of Euro 100/t ($110/t) in its flat-rolled product portfolio, after having increased prices by Euro 150/t on 10 Mar’22. Post-the recent announcement, effective prices of HRCs now stand at Euro 1,400/t ($1,540/t) for HRC and Euro 1,500/t ($1,650/t) for CRC’s.

Such a price structure makes Indian offers still cheaper.

• Automotive demand rising in EU: Demand for flat products is seen rising in the EU as the semi-conductor shortage is showing signs of easing. Thus, auto production is rising, fuelling CRC and other flat steel exports from India.

Outlook

Indian exports are likely to remain bolstered by demand from the EU and Turkey since the Russia-Ukraine conflict is not showing signs of easing. This would mean finished steel supplies to the EU and Turkey will continue to remain disrupted.

Belarus is also facing sanctions from the western powers. The European Commission (EC) recently decided to adjust the safeguard measure to ensure the import bans imposed on Russia and Belarus did not create a supply shortage in the EU in the categories affected. Consequently, in each product category where Belarus and Russia had country-specific tariff rate quotas, the EC has proportionally redistributed those volumes among other exporting countries based on the latter’s share of imports in 2021. India has a substantial presence in most of the categories and thus stands to gain.

Moreover, with the chip supply expected to stabilise in 2022, the European Automobile manufacturers’ Association forecasts passenger car registrations in the EU will return to growth, rising almost 8% to 10.5 million units. Against this backdrop, demand for flat steel, especially CRCs, from EU will be high, going forward. If Russia and Ukraine cannot supply then India will bag a fair share. And if EU needs the cargo, the view is, it will not look at the price tags from India.