Traders have been experiencing a lull in terms of export shipments in September after hitting a record high of 2.44 million tonnes (MnT) in July. August set the tone for a subdued exports trend, of course, with data pointing to a possibly far more sobre 1.65 MnT (excluding stainless steel, as usual) of overseas shipments, a month-on-month decrease of 32.37% over July.
September export volumes may hover around of 1.5-1.75 MnT, sources inform Steel360, adding that not much exports activity is expected from Indian mills in October either. “We may hear a few deals from a leading integrated steel player, surprisingly, to Vietnam at low prices. A lot depends on how the domestic market reacts in the upcoming festive month. It is difficult to anticipate which direction markets/prices will move in October at this juncture. But, overall, volumes will stay subdued,” a trader informs.
“At present, there is not much exports activity and all traders are trying to execute their contracts which were booked in as early as June. July shipments have been delayed to October, for some traders,” a source indicates.
Overall, from April-August (provisional), 2020, steel exports touched 9.46 MnT against 4.09 MnT in the same first five months of 2019-20, a more than 130% rise year-on-year. And a lion’s share of this quantum had been going into China but which subsequently decreased.
India usually consumes around 25 MnT of steel in a quarter but as per Steel360 data, the country, from March till August, 2020 has consumed around 25 MnT.
However, now, all the steel consuming sectors are looking up. Auto, which had declined by 75% in the April-June quarter compared to the same quarter last fiscal year, is trying to come back. Construction, which had been completely stalled, will resume post-monsoon. Towards the end of the year, infrastructure and construction projects get a push and there is the pressure of project closures as well. And that is good news because construction is the biggest steel consumer, at more than 50% share at a conservative estimate.
But mills are happy. The subdued exports trend is a direct fallout of rising domestic demand, with prices too becoming more lucrative in the home-grown space. Domestic HRC and CRC prices have been hiked multiple times since July, 2020. Prices of both HRCs and CRCs were raised by INR 500-700 per tonne in early and mid-July and again by INR 1,000-1,250 in end-July. Early August saw a considerable hike by INR 2,000 per tonne for both categories and again by up to INR 1,000 per tonne twice in this month. While HRC prices were hiked only once in the third week of September, by INR 700/tonne, CRC gained by a meaty INR 3,000-3,500 in early September and again by INR 2,000-2,500/tonne by mid-month.
In the third week of September, HRC prices were ruling at INR 41,250-41,500/tonne ex-Mumbai, INR 41,500-42,000/tonne ex-Delhi and INR 42,000-42,500/tonne ex-Chennai. CRC (0.9 mm IS513 GR) prices were seen at INR 50,000-50,500/tonne (ex-Mumbai), INR 50,000-51,000/tonne ex-Delhi and INR 50,000-51,000/tonne ex-Chennai.
Traders are continuing to restock the material in anticipation of a further increase in prices. Moreover, there is a supply crunch in CRCs due to maintenance issues in a few steel mills, it seems.
Except for one leading integrated steel major, no other player was particularly active in overseas shipments in September. This mill started with deals at USD 495/tonne fob and ended up with booking at USD 520/tonne fob.
Chinese domestic and equivalent export prices kept rising until early September. However, for the last two weeks, Chinese prices had been seeing some corrections. China’s domestic demand was high and hence the market was in a position to command strong domestic prices. There was no pressing need for overseas sales and so export prices remained firm too. However, now, a destination like Vietnam, where China was totally absent till August this year, has become the lowest price source for this Asian country. Offers from China were ruling at around USD 515-520 cfr Vietnam.
But Indian mills are selective now and will not look at Vietnam or South East Asia or any other low-priced destination on account of their own strong domestic sales, although a few local steel majors are eyeing Europe as the prices have started strengthening there. Current Indian fob levels for Europe are in the range of USD 530-540/tonne main ports India, subject to availability and allocation.
“Domestic sales are still strong and a better net sales realisation (NSR) giver. Price differential in favour of domestic sales is in the range of INR 4,000 per tonne,” says a trader. This gap has narrowed from the levels of INR 6,500-7,000 per tonne around a month back but still domestic sales look more attractive.
The price gap has narrowed essentially because of a rise in export prices in tandem. Export prices of HRCs, which were depressed at USD 429 per tonne fob in June, had climbed a little to USD 441 per tonne in July (but were less lucrative compared to the domestic rate of USD 487/tonne in this same month). In August, export prices hovered around USD 500 per tonne (against the far more robust USD 542/tonne domestic rates).
Export prices have been climbing steadily since April’s rock-bottom USD 380/tonne fob to USD 395/tonne in May to touch August and September’s elevated levels. And the reason for this is again high domestic demand, which have put Indian mills in a stronger position to command the higher export prices. The scenario is true not only in terms of India but other Asian HRC sourcing countries like Japan, Korea, Indonesia, Thailand etc.
From January to July, imports amounted to around 10.45 MnT and India’s main exporting countries were led by China, followed by Vietnam, Nepal, UAE and others. China’s imports from India as per our data, amounted to 3.43 MnT over January to July, 2020 followed by Vietnam at 1.97 MnT, 0.66 MnT to Nepal, 0.53 MnT to the UAE and 3.43 MnT to other countries.
China traditionally also imports from Japan and South Korea – the dominant trading partners. However, due to the slowdown, exports from these countries were affected that created a gap in the Chinese market which could be exploited by Indian mills. Domestic demand in China had picked up sharply after the lockdown. And items that were exported included finished flats, finished longs and semi finished or billets. We have also noticed that it is mainly finished flats which have found the most takers in India’s exports markets. Over May to July, finished flats exports were at 3.71 MnT whereas finished longs were at 0.45 MnT and billets were at a substantial 2.86 MnT.
Exports prices in September-October are likely to remain elevated but whether deals will be struck at these levels will remain to be seen. Many traders hazard that a select few Indian mills will be active in October, provided deals are struck at meaty price levels.
Chinese prices have been retreating. China too is lessening its imports. Again, the same reason why Indian domestic prices have gone up and accordingly export prices as well.
The gap between Chinese local and arrival prices from India for buyers in China has narrowed. Hence, there is less interest for the Indian materials. A few weeks back, Chinese domestic prices were equivalent to USD 540-550/tonne cfr. Indian export prices were also at similar levels if offered to China. Previously, Chinese domestic prices were at USD 450/tonne cfr levels whereas Indian offers were at USD 430-440/tonne levels. So, there is no point in buying from India as Indian HRC prices attract an additional 3% import duty in China.
There is a bit of silence in South East Asian markets as well. Here, buyers are quite too, but mills’ prices had been hovering around USD 520-540/tonne fob. “Export prices are up because domestic markets across South Asian economies like Thailand, Indonesia, the Philippines etc are looking up, allowing these economies to up their export prices. Such a scenario bodes well for Indian steel makers, opening up home-grown demand opportunities. Thus, exports do look less attractive under such circumstances,” reaffirms another market source.