The struggling Flat Steel Industry was running on the hope of export market owing to slowdown in domestic economy. We at Steel 360, tried to understand the concerns ahead for the Flat Steel manufacturers.
Despite a low demand in the economy, manufacturers managed to raise prices thrice in the past 3 months. Even if the domestic demand was not quite strong, an aggressive export strategy helped many manufacturers to tide off the gloom in the domestic economy. They achieved good sales volume by exporting to European & Middle Eastern countries. As per an industry veteran, the Expo 2020 in UAE has led to a good demand from UAE. Indian manufacturers see this as a good opportunity for supplying their Steel products to this market.
Total HR Coil export from India has been 1.6 MnT between Apr’13 & Feb’14. Out of this, around 145,000 MT of HR Coils were exported to UAE between April to February this fiscal. In addition, HRC exports to Belgium & Italy were equally remarkable as it stood to around 119,800 MT & 186,000 MT respectively, during this period. Manufacturers preferred to ship bulk quantities to these countries at better prices rather than to sell in the domestic markets. The domestic prices are trading at around INR 39,000/MT, whereas the export prices hover at INR 33,000-35,000/MT.
Manufacturers’ export realization to these countries had been quite lower as compared to their domestic prices owing to better volumes.
Vanishing export feasibility
Relying on the opportunities of a lucrative export market, the volume of exports from India saw a steep appreciation in the past few months. However, many market participants believe that there are three factors, which can change the dynamics of the industry. Firstly, the appreciation of INR can affect export margins of manufacturers. Secondly, India has been exporting to Belgium and the current CNF offers to Europe have seen a correction of USD 16 last week and expected to fall further. This may add on to the woes of the manufacturers. Lastly, many market experts are of the view that the depreciation of Yuan can make Chinese HRC offers more competitive in the international market; this will further put pressure on Indian export offers.