The market is again abuzz with strong rumours that soon, China is likely to impose a steel export tax of 10 to 15% anytime between 1 to15 Jul ’21.
This move is expected to have repercussions across the global steel market since China aims to disincentivise exports to allow the material to stay within its shores for domestic use against a backdrop of production cuts. The tax may also curb runaway inflation in commodity prices. It would be applicable on certain steel products, including HRCs and GI. China exports roughly 55 mn t of finished steel annually, a major share of which are GI, HRC and PPGI.
Enquiries for Indian steel increase
As a direct result of this rumour, there has been a distinct increase in overseas enquiries for Indian steel. Market participants feel that the imposition of the export tax will probably increase the landed cost of Chinese exports, driving overseas buyers to the Indian market.
As a result, enquiries which had been silent of late, have resumed, although these are at a lower price levels as compared to the last negotiated deals. For instance, SteelMint had heard of a deal for 20,000 t of HRCs being booked to the UAE at a price range of $1,050-1,055/t CFR, for Jul ’21 shipments, which translates into INR 71,000-72,000/t on ex-mill basis. However, the deal, concluded at a price lower than $30-40/t from the last trade, was still higher than domestic realisations.
Outlook
It may be too early to say whether exports will pick up to the levels of 1.5 to 2 mn t, expected in Jun ’21. However, since the present bookings are for Jul ’21 shipments, mills are upbeat that the tight vessel availability scenario could ease out by that time.
The mills are also not in a hurry since they want more clarity on the Chinese steel exports scenario. That said, once the Chinese export tax becomes a reality, exports from India will in all probability increase and mills would not be under pressure to cut prices either.
On the domestic front, with pandemic situation improving, steelmakers are also hopeful of demand resuming. June and July may be lean months but August onwards the pent-up demand could get unleashed, feel sources. Thus, either way, steelmakers are comfortably placed at present.
SteelMint’s daily billet index closed lower by INR 200/t to close at INR 42,700/t exw Raipur and scrap index closed lower by INR 400/t.
Chinese iron ore & steel futures rebounded yesterday towards market close after witnessing a fall in morning trading sessions. Today, both iron ore & steel futures have exhibited gains in morning trading sessions.
Prices as on 8:35 IST, 9th June. d-o-d changes indicated against closing price of 08th June
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