Flats drag down Indian steel exports 30% m-o-m in April

• Volumes in April fall but still remain higher that Jan-Feb levels
  
  
• Flats exports drop 34% m-o-m, China hogs Vietnam market
  
  
• May-June may see volumes dipping further
  
  
• New EU quotas to inject positivity into market
  
  

Morning Brief: Indian steel exports fell almost 30% m-o-m in April, 2022, to 1.44 million tonnes (mnt) against 2.04 mnt in March, as per provisional data collated by SteelMint. However, even if the volumes are down, these are still higher compared to January's 1.06 mnt and February's 1.25 mnt. India's average monthly steel exports hover around 1.60 mnt.

Over January-April, exports touched 5.78 mnt compared to 5.99 mnt in the same period in 2021, a y-o-y dip of 3.5%.

Reasons for fall in flats exports
What is to be noted is the 34% fall in flat steel exports m-o-m to a little less than 1 mnt (compared to 1.52 mnt in March). Within flats, exports of hot rolled coils (HRCs) and plates dropped 38% and cold rolled coils (CRCs) by nearly 52%. Factors that influenced the drop are as follows.

EU demand started slackening: Exports to the European Union rose 19% m-o-m, as per SteelMint data, but this was largely due to some delayed deliveries of old bookings. As a result, the EU remained India's largest exporting zone in Jan-April, with 1.65 mnt. Later last month, however, fresh bookings dropped, as the EU became well-stocked and the quotas too were awaited. "Buyers' credit lines were also exhausted due to historically high prices, and sufficient stocks with distributors," said a source.

Vietnam's preference for Chinese, domestic material: Volumes sold to Vietnam end-users fell a sharp 43% m-o-m as Chinese mills spoilt Indian chances with highly competitive offers. Chinese mills were under pressure to offload inventory amid the worst Covid outbreak and consequent lockdown that impacted domestic demand.

Moreover, Vietnam end-users showed a marked preference for domestic HRCs at times because of lack of containers that led to a higher delivery time, and weighed on Chinese mills too.

Indian mills, lured by the higher realisations in the EU and UAE markets, also refrained from offering to Vietnam buyers at lower prices.

Longs' performance
Longs exports reduced by 43% to 0.10 mnt but volume-wise, this was less than 80,000 tonnes compared to 0.18 mnt in March.

Higher domestic prices, lower overseas interest: However, higher domestic realizations made mills focus on home ground. Moreover, the rebar export market remained silent in April as key importing nations held back from placing fresh inquiries. As per reports, buying interest was thin in Singapore with market participants nursing a bearish outlook. Also, Hong Kong importers remained absent due to a preference for Middle East materials.

Semis: This segment dipped marginally by 1.88% to 0.33 mnt (0.34 mnt) but this is nothing to write home about as monthly average volumes are pegged at 0.47 mnt. Billets exports from India generally range anywhere from 0.25 mnt to 0.60 mnt.

Demand from India's regular markets like Nepal and other neighbouring countries remained more or less buoyant in April.

However, overall, billet inquiries dipped marginally as the Central Bank of Egypt (CBE) asked importers to use letters of credit (LCs) rather than fall back on documentary collection when buying from abroad, despite concerns over such a move. Volumes to Egypt dropped over 85% to 28,000 tonnes but then March levels had been abnormally high at almost 0.2 mnt.

Outlook
Exports in May are likely to dip further as fresh bookings have been elusive so far across flats, longs and semis.

Also, China will continue to explore exports with domestic demand down, and with highly competitive offers which may dent Indian margin prospects.

On a positive note, Indian mills are awaiting the unveiling of the EU quotas for the July-September quarter, which warrant some bookings.