Indian steel mills are eager to offload material in the export market despite the challenges of low vessel availability and high freights. This is evident from the fact that easily 1.5-2 lakh tonnes worth of export tenders for long products are floating in the market currently for Jul-Aug’21 shipments.
The items include billets, rebar, wire rods etc and the offers are in the form of direct tenders or even over-the-counter trade.
For instance, a private mill offered 70,000 tonnes of billets, rebar and wire rods as recently as 24 Jun’21 while a state-owned mill floated a fresh tender of 30,000 tonnes of billets. Other leading private mills also have similar cargoes on offer.
Why are mills keen to offload in the export market?
First, mills are facing inventory pile-up. Against the usual inventory level of 12-15 days, these are getting extended to around 20-25. Mills are seeing a sharp reduction in sales across domestic and overseas markets.
Secondly, the inventory is piling up on sluggish domestic demand, an offshoot of the Covid-induced lockdowns and monsoon which impacts domestic long products consumption. Export sales are hit on account of vessel and high freight issues.
Thirdly, construction players, facing sharp cost overruns, are delaying purchases. Rebar prices shot up from around INR 42,000-43,000/t at the time of commissioning of these projects (late last year to early this year) to around INR 53,000-55,000/t levels some time back. However, since then primary mills have reduced their ex-mill offers to INR 48,000-50,000/t and those from the secondary mills are around INR 46,000-47,000/t.
Russian export tax
The Russian government, on 24 Jun’21, proposed a base export duty on all steel products of 15%, plus another specific component to be calculated as the minimum rate per tonne of the product.
Russia is the largest exporter of billets, at 13 mn t annually. Thus, if the Russian mills are absent from the export market, this can benefit Indian steelmakers.
But there is no enquiry for Indian cargo from China yet. Markets like Manila and elsewhere are booking billets mainly from Vietnam, it is heard.
However, a source said: “The move may benefit Indian mills, if not immediately then in the short to medium term since the tax is to stay implemented till end-Dec ’21.”
Total steel export volumes out of India in May’21 were at 1.75 mn t in which 0.16 mn t comprised long products, a 24% m-o-m drop over 0.21 mn t in Apr and 45% decline over 0.29 mn t in Mar.
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