- Exports from Russia, Ukraine, India to decrease sharply
- Demand decline seen from most geographies
- CY23 augurs well on positive global cues
Morning Brief: Global billets exports are expected to drop by over 25% to almost 30 million tonnes (mnt) in calendar 2022 against 40 mnt in 2021, as per SteelMint’s forecast.
The top three exporters are traditionally Russia, Iran and Japan. However, Russia’s export volumes are expected to fall 14.55% to 12.80 mnt in the current year against almost 15 mnt last year. Iran is set to show an improvement with volumes seen rising 15.60% to 5.30 mnt this year against 4.59 mnt last year. Japan is expected to show a drop of 8.47% this year to 2.95 mnt against last year’s 3.22 mnt.
Importantly, India’s billet exports are seen plunging almost 60% to 2.10 mnt in this year compared to 5.24 mnt in 2021. Ukraine has almost left the field, wounded by the war.
Factors influencing decline in global billets exports :
Supply-side issues:-
- Russia’s volumes down, Ukraine almost exits market: In the pre-war period, CIS was a very active region in terms of the global billets trade. Last calendar, Russia led with almost 15 mnt, followed by Ukraine with 6.68 mnt. Russia and Ukraine combined exported almost 22 mnt of billets in 2021. But this year has been different because of Russia’s almost year-long aggression on Ukraine. Russia’s volumes are down almost 15% and Ukraine is floundering for a toehold with a plunge of almost 69% at 2.10 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 nearly 60% 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 an increase in melting capacities of its domestic mills. This led to a drop in India’s billets exports to Nepal.
Demand-side issues:-
- China loses appetite: The overall decline in seaborne trade volumes is also a factor of China’s lack of appetite. Its imports of billets are likely to plunge 56% y-o-y to around 5.30 mnt this year from 12 mnt in 2021. However, it may be mentioned that China is not a habitual billets importer. An extraordinary situation had been created last year, due to Covid, because of which the Chinese government had offered fiscal stimulus, especially to the construction sector. This had resulted in extra billets demand for construction steel and had led China to source from other geographies.
- Tepid demand from SE Asia: Demand from the Southeast Asian countries remained tepid as recovery in construction activities lagged behind. The region was plagued by rising inflation which dented consumption. Thus, Thailand’s imports this year are seen falling 22% to 2.40 mnt (3.07 mnt in 2021) and Taiwan’s by 18% to 3.40 mnt (4.17 mnt).
- Europe goes slow: Many EU countries stepped back from buying billets this year as the Continent reeled under an unprecedented rise in energy and gas prices which fuelled inflation. Therefore, Italy’s import volumes are set to fall a deep 31% in 2022 to 2.50 mnt (3.66 mnt in 2021), Belgium’s by 20% to 1.4 mnt (1.77 mnt) and France’s by 8% to 1.08 mnt (1.17 mnt).
- US demand wanes: The US was the fourth-largest billets buyer last year at 5.26 mnt. However, this year, its import volumes are set to fall by 36% to around 3.40 mnt. Downstream demand has been weak amid persistently high supply. The economy experienced two consecutive quarters of negative growth. Weak manufacturing and housing activities kept buyers in wait-and-watch mode as they refrained from getting saddled with unwanted expensive inventory should the downturn turn worse.
Outlook
The seaborne billets trade is expected to do better in 2023 compared to the current year. Demand is beginning to look up in several geographies, including China and the EU.
Southeast Asia, the largest billets consuming geography, will possibly see steel demand inching up, driven by economic growth and easing of Covid restrictions. As per reports, demand for steel in ASEAN (Indonesia, Malaysia, the Philippines, Vietnam and Thailand) is likely to rise almost 6% by end of 2022 and another 6% by 2023. Inflation is also expected to slow down from 5.2% in 2022 to 4.1% in 2023.
These factors will support billets demand next year.
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