- Steel exports unlikely to pick up soon
- IF prices may see upward pressure
- Industry seeks RODTEP refuge
Morning Brief: The India Steel Composite Index remained almost flat for the week ending 25 November, 2022, moving up a negligible 0.4% to close at 145.50 points (144.90 points in the previous week).
The flats index too remained lacklustre, losing a trifle 0.07% to 146.70 (146.80) points.
Longs upped a light 0.84% to 144.30 (143.10) points w-o-w.
Putting a lie to expectations, the index proved that the steel export duty removal late on 19 November, failed to inject the much-needed excitement into the market. The short spurts of gains seen immediately post-duty removal ricocheted back soon to pre-duty removal levels.
Why did the index belie expectations of a rebound?
Global demand is not so good yet and export volumes are not expected to increase in the short to medium term. Speaking exclusively to SteelMint on the sidelines of the recently-concluded ISA conclave in New Delhi, JSW Group supremo Sajjan Jindal said last year India exported close to 20 million tonnes. This year, the global markets have slowed down a lot, especially Europe and other part of the world. “Therefore, we do not expect much of steel exports to happen and so will continue to focus on long term domestic customers,” he asserted.
He emphasized, “India will see a big drop in steel exports – the fiscal may end with export volumes at less than 10 mnt.”
Dilip Oommnen, ISA president and CEO, AM/NS India, told SteelMint the Middle East export market that India had vacated has been taken over by China and it will be very difficult to regain the same. He reminded that post-the export duty imposition in May total mill-level stocks have increased 20% On the other hand Chinese exports have increased 22% in the Middle East market which India had to relinquish due to the duty.
Both do not see export volumes increasing immediately.
Pellet exports spin-off
The only positive spin-off of the export duty removal is the resumption in pellet exports. This development will push up domestic pellets and sponge iron prices. Domestic pellet prices saw a quick, net INR 700/t hike post-duty waiver which will impact sponge prices. Eventually, secondary mills will see a rise in the cost of production by INR 1,500/t as per SteelMint estimates.
Billet prices too may increase, riding the higher pellet and sponge prices. For instance, before the duty removal, billets hovered at around INR 39,500/t levels. Post-duty removal, these had shot up to around INR 44,000/t, but had settled back at about INR 40,000/t. And, sources feel this is the bottom and billets can only command higher rates from here, goaded by the cost push.
Outlook
In the short term, exports are highly unlikely to show a spurt. However, pellet exports may sustain since China is showing a good appetite for the material. This may translate into minimal price hikes for secondary mills to offset the cost push.
Sources insisted that secondary sector prices may go up from here but only to cover the increased cost of production, otherwise a sharp price hike will backfire.
Dilip Oommen urged the government to consider the industry’s request to include the Remission of Duties & Taxes on Export Products (RODTEP) scheme which will give a fillip to steel exports and help recapture lost markets.
Taking a long-term view, steel minister Jyotiraditya Scindia said, in the days to come, the Indian steel industry will firmly have its footprint once again in key markets like Southeast Asia, Europe and other parts of the world.
The India Steel Composite Index
The India Steel Composite Index is assessed on a weekly basis: every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.
SteelMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, SteelMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India. For details click to view the methodology document.
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