With domestic demand falling to almost nil during the total lockdown in April and most of May, steel makers have been looking at exports for liquidating inventory. For Rashtriya Ispat Nigam Limited (RINL), the holding company for Visakhapatnam Steel Plant (VSP), exports played a big role too in stock liquidation. So much so that the steel PSU has set an increased target of 2 lakh tonnes of exports in June, 2020.
Confirming the role of exports, RINL Chairman & Managing Director, told SteelMint that, yes, inventory liquidation happened mainly through exports during April and May, 2020. In April, RINL exported 120,000 tonnes and, in May, about 150,000 tonnes of semi-finished products and 25,000 tonnes of pig iron. “In June, we have set an exports target of 2 lakh tonnes,” he informed, which is actually 66.6% higher over April, 2020 and around 14% higher over total exports in May and 33.33% higher in terms of semis.
RINL, which is a long products player, saw severe lack of demand from mid-March with the construction and automobile sectors totally locked down. “During the lockdown, sales slumped drastically. We usually record sales of 500,000 tonnes a month, which fell sharply to 350,000 tonnes in March this year. So, yes, I would say that the impact has been quite severe,” confided Rath.
China demand: How long?
And exports proved to be a boon in these lean times. Since emerging from the lockdown, China has put a lot of additional demand in the market, mainly for semi-finished products. The Chinese government is gung-ho on the infrastructure front and additional investments are in the pipeline.
Rath said, in China, probably all the steel-making facilities are not being used at present and that’s why there is a demand surge for semis there. “These products (semis) are probably going into their construction and infrastructure sectors at a time when both sectors in that country are getting a big push from the government,” he added.
So, from India’s point of view, he added: “If exports to China maintain their current pace for a couple of more months, along with exports to the Middle East, the overall exports performance should be quite consistent, at least for another couple of months.”
RINL exports predominantly to China and the Middle East. Out of the total exports of 150,000t in May, about 60,000t were shipped to the Middle East and the rest to China. Going forward, this ratio might change, Rath said, but Chinese demand for semis has been the dominant factor behind the surging exports numbers. So China will likely account for a lion’s share of Indian exports in the coming months.
Further price consolidation likely
RINL expects further consolidation in billets export as well as domestic prices.
Rath said that, “Yes, billets export prices have gone up. From $360/t in April, these were hovering around $390/t in May. There was a $30/t jump in billets exports prices to China and the Middle East in May compared to April. So the trend is definitely towards further consolidation in prices.”
Domestically too, Rath said demand has picked up but not significantly enough and the industry is thus a bit cautious. “There is a call to increase prices but most of us are actually rolling over our prices. But, in future, if demand picks up further, there will definitely be an increase in billets prices in the domestic market too,” he averred.
He reasoned that with the total lifting of the lockdown across states in the country, domestic prices too should get a boost. “I expect this price rise to sustain,” he stressed.
Domestic billets prices were hovering around INR 26,000-27,000/t in mid-March, but rose to INR 29,000-30,000 levels in end-May only to show a downward trend in June.
~ By Madhumita Mookerji
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