Indian steel mills show mettle, reduce dependence on China for exports

NEW DELHI, Aug 19, 2020, Business Standard. With the world opening up for business, Indian steelmakers are reducing dependence on China for exports, Business Standard reported.

According to data from Joint Plant Committee (JPC), during April and May, India exported one million tonne of semi-finished steel to China, while total semi-finished steel exports stood at 1.3 million tonne; in June and July, however, China’s share was at 45.7 per cent and 55.47 per cent, respectively. China’s share of semi-finished steel exports had peaked at 84 per cent in May.

In finished steel, too, China’s share has dropped from around 30 per cent during April to June to 24 per cent in July.

Jindal Steel & Power managing director, V R Sharma, said, in August, China accounted for 30 per cent of the company’s exports, but in September, it will be zero. “This is purely on commercial grounds. There is a price difference of 4 to 5 per cent between China and other countries,” he explained.

Imports from China are generally a cause for concern, but the situation reversed during the lockdown as companies rushed to plug the demand gap there as it started recovering from the aftermath of pandemic much faster.

Another major primary steel producer confirmed that China’s share in its exports was coming down. “West Asia, Taiwan and even Europe had emerged as important destinations for finished steel,” the producer said.

For semi-finished steel, Indonesia, Nepal, Thailand, Philippines were some of the other destinations for exports of semi-finished steel from India during June and July, though volumes were much smaller when compared to China. But a look at data over last four months shows that exports were getting distributed across countries.

“Landed price of steel imported from China after factoring in a 1.5-2 months of lead time, is almost at the same level as the current domestic price. Interestingly, at present, domestic and export prices of Indian hot rolled coil (HRC) are hovering at similar levels,” said Jayanta Roy, senior vice president, ICRA.

Steelmakers increased prices by Rs 3,000 a tonne over July and August on the back of an increase in international prices, a pick-up in domestic demand and cost push from key raw materials like iron ore.

If export and domestic prices are at the same level, companies may prefer to sell at home, provided demand picks up. “Domestic steel demand sequentially increased by over 10 per cent month-on-month, which suggests a gradual recovery of demand following the relaxation of nationwide lockdown. However, a return to pre-Covid level of demand would take time, as steel consumption in July 2020 is still 29.06 per cent lower than the same in July 2019,” Roy said.

Steelmakers expect exports to taper with an improvement in domestic demand. The nationwide lockdown in April and May, had pushed steel exports to record levels with semi-finished steel in the first four months of the current financial year crossing total volumes of semi-finished steel exports the whole of last year.

Finished steel exports during April to July were more than 50 per cent of total volumes of finished steel exports of last year.

Most companies resorted to exports during April and May to tide over the nationwide lockdown which impacted end-users of steel. However, month-on-month, there is a decline in exports. In June, finished steel exports was at 1.5 million tonnes while semi-finished steel was at 991,000 tonnes. But in July, the corresponding figures were 1.376 million tonnes and 941,000 tonnes.

Jayant Acharya, director – commercial & marketing, JSW Steel, said, exports is not likely to continue at the same levels as in the last few months. As domestic demand improves, exports will continue in a calibrated manner.