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Quiet New Year for Indian steel exports, Jan-Mar'22 may be slow

Indian steel exports may rise over 15% in 2021 Chinese mills reopen export allocations Clarity on Europe quotas from mid-Jan Indian mills offers comparatively higher curr...

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6 Jan 2022, 09:36 IST
Quiet New Year for Indian steel exports, Jan-Mar'22 may be slow

  • Indian steel exports may rise over 15% in 2021

  • Chinese mills reopen export allocations

  • Clarity on Europe quotas from mid-Jan

  • Indian mills offers comparatively higher currently

  • Exporting countries under pressure

  • Q1 may be slow

Indian steel exports have been having a very quiet New Year. There have been very sporadic bookings in Dec'21 for January and the first week of the current month was silent. But Indian mills, it is heard, are not keen to sell below $750/tonne (t) CFR.

Exports in CY'21 are expected to rise by around 16% to around 20 million tonnes compared to 17.50 mn t in CY'20, but the tempo has sharply slowed down since Nov'22.

Even if some deals happen now, these can only be shipped in February. Also, not very substantial volumes can be booked either, at best 10,000-20,000 tonnes, may be to Middle East etc but not traditional destinations like Vietnam. "The trend shows substantial deals are not going to happen for January or even February. The market is slow because of Covid, winter, chip shortage and lack of demand," said a source.

Vietnam may offer even lower than $740/t CFR to book orders for 30,000-40,000 t. But since Indian mills want at least above $750/ CFR, there is a mismatch of almost $10/t. "At these levels, it is difficult to make deals happen. In a dropping market, a customer expects to close each deal at a price lower from the previous level. So many overseas mills would look to offer at $740-745/t CFR," a source informed.

Factors impacting Indian exports at present

Exporting countries aggressive: May be, the Indian mills are testing the waters at $750/t and above CFR levels but many traders feel this strategy may not work because competing countries - China, Japan, Korea, Vietnam, Taiwan etc - are vying to sell and some player will inevitably fill up the gap left open by Indian mills.

The exporting countries are under pressure since their domestic demand is very low at present on account of severe winter, chip shortage - which is impacting flat steel demand from auto makers - and of course the Omicron surge.

"Some Korean mills are pushing for some deals with us," informed an Indian trader, reasoning that how long can they hold.

Chinese mills under pressure: China's domestic demand is low since it is experiencing heavy snowfall in the northern region, where all infrastructure projects have now been stalled till March. Thus, the northern mills have become aggressive on the exports front. A clearer price picture will emerge next week.

Most Chinese mills will be reopening their export allocations from 6 Jan'22. The Shanghai region mills have already done today while the north-eastern region ones will resume from tomorrow.

"But Chinese mills are under pressure, as can be seen from the proactive approach adopted by them in making offers for API and value-added grades," informed a trading source.

Europe demand to be subdued: Where Europe is concerned, the market will get clarity on the new quotas around 15 Jan'22. However, SteelMint does not see a rally in exports to Europe in January or the entire Q1 (Jan-Mar'22), because substantial Indian material is still lying in European Custom-bonded warehouses. Once the quotas open up after 15 Jan'22, European buyers will return to the market to scoop up the material awaiting clearance from the warehouses. They will not need to pay the additional 25% safeguard duty since these volumes automatically fall under the new quotas. Moreover, Indian mills can also avail of the "residual quotas" which are over and above India's 0.56 million tonnes per quarter (which have not been fully utilized by other exporting countries but can be used up by another country, including India). "Indian mills can avail of the residual quota from end of Q1, after seeing how exports pan out," observed a source.

Outlook

Exports are likely to fall in Dec'21 m-o-m and also through entire Q1 because of a slow Europe market, and the lack of appetite for Indian mills' comparatively higher offers, although the pressure will escalate if Vietnam mills offer at around $740/t CFR.

But domestic mill-level flat steel prices, even after correcting downward on 5 Jan'22 to INR 64,500-65,000/t, in dollar parity, are at over $850/t which does not give room to lower export prices.

 

6 Jan 2022, 09:36 IST

 

 

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