Global steel exports up 3% in Jan-Sep'23; China leads, India slips to 11th slot*

• Inflation, currency depreciation, energy costs impact domestic demand
  
  
• Geopolitical factors hit Russia, Turkiye exports
  
  
• Short term outlook depends on China scenario
  
  

Morning Brief: After performing poorly last year, the global seaborne steel export trade has looked up so far in 2023. Volumes (including flats, longs and semis) from the top 16 exporters, who command 80-85% of the total seaborne trade, showed a 3% y-o-y increase over January-September, 2023 to 195 million tonnes (mnt) compared to 189 mnt recorded in the same nine months in 2022, reveals data collated by SteelMint.

Among the leading players, China put up the best show compared to the rest. Of the 16 countries tracked, nine were in the red but the overall volumes remained in positive zone because of China's share. India, meanwhile, slipped a few notches down to 10th spot from 6th last year.

Factors which influenced global steel trade in 9MCY'23

China rides high output, low demand, sliding yuan: The dragon country was perhaps conspicuous in showing a 32% y-o-y increase in steel exports to nearly 68 mnt in this time-frame under review against 51 mnt seen in the corresponding period last year.

Chinese mills were beset by the triple whammy of high production, squeezed margins and low domestic demand. Thus, they had no option but to offload, and cheap, into other countries. Data maintained with SteelMint reveals that China's FOB HRC export offers averaged $606/tonne (t) over January-September, 2023 against Japan's $625/t and Russia's $630/t. Indian mills, out-priced from the market, averaged $628/t in this period.

Crude steel output rose a slim 2% over January-September, 2023, against a higher 6% earlier in the year. On the other hand, apparent crude steel consumption was at 658.50 mnt, more or less the same y-o-y and up a mere 30 mnt from 2019 levels.

Thirdly, the yuan's slide was a boon, making exports rather lucrative. The currency has eroded more than 8% this year, from a level of 6.72 to the dollar to the current 7.29.

Japan & Korea face declined domestic demand: These two are second- and third-highest exporters of steel respectively. Japan's volumes rose a nominal 3% to 23 mnt (22 mnt) and Korea's by 6% to 19 mnt (18 mnt). Both the increases were nominal and can be mainly attributed to a drop in domestic demand amid high interest rates. As per worldsteel, labour shortages and rising costs in Japan are leading to sluggish growth in construction activities. In Korea, the recovery in demand in 2023 is moderate, which created a case for overseas sales.

Russia hit by Western sanctions: The fifth largest steel exporter globally, Russia saw its steel exports fall a sharp 27% to 10.5 mnt (14 mnt) in this period.

Obviously the impact of the Western sanctions are limiting exports, especially with the US and EU firm on maintaining their stand and mulling further actions.

Vietnam's low domestic demand pushes up exports: This Southeast Asian country saw a 26% y-o-y increase in steel exports to 7.40 mnt (6 mnt). It is primarily exports-led and has been adding capacities amid low domestic demand. Over the first half of the year, Vietnam's crude steel production was down 21% y-o-y. However, domestic steel consumption also dropped 17%, which pushed up steel exports, as per a report. Home demand dropped because of tight real estate credit policies, high interest rates and inflation.

Importantly, Vietnam has always been an active seller to Europe, wherein it bought HRCs from China, value-added into colour-coated/galvanised and re-exported to this geography. With exports from Russia and Ukraine (which mainly sold to Europe) down, Vietnam has been able to garner their share too.

Turkiye beset by several challenges: Steel export volumes from Turkiye declined 39% to 7.20 mnt (12 mnt) in January-September, 2023. Factors like unfavourable exchange rate policies, high interest rates which hit 30-35%, and uncompetitive energy costs all colluded to depress home demand. The latest geo-political crisis in the Middle East and now Yemen's possible involvement may have a big impact on Turkish reinforced bar exports, as per IREPAS. On the other hand, EU demand is not improving and does not offer much hope to Turkish mills in the near future. Capacity utilization among Turkish longs producers is around 50%, owing to lean domestic and export demand. Also, Turkiye has become an indirect casualty of the western sanctions on Russia. It was a large importer of Russian billets. However, the same cannot be used in manufacturing and exporting finished products to Europe. That apart, newer suppliers from the Middle East and Africa, with cheaper offers, are flooding a limited longs global market, further putting pressure on Turkiye.

India focuses on good home demand: From 6th position on the global charts, it slipped to 11th* with 6.5 mnt (9 mnt) in this period, down a sharp 29% y-o-y. Home demand has been good (up 15% over January-September) which has kept the mills focused onshore. Secondly, manufacturers have been out-priced by China's cut-throat offers. Thirdly, its traditional market, Vietnam, along with the Middle East, have been lured away by China's attractive pricing.

Ukraine mills grapple with war-related challenges: Once a key exporter of steel products, today Ukraine is languishing at a mere 2 mnt (4 mnt), down a significant 47% y-o-y.

Rolled steel production possibly declined because Russian troops blew up the Kakhovka hydro-electric power station in June, 2023, which disrupted water supply to mills in the Dnipropetrovsk region. Also, many steel facilities are still under threat of destruction and production is often subjected to suspension. ArcelorMittal Kryvyi Rih suspended production of steel and rolled items to reduce water consumption.

Rampant logistics disruptions are also impeding movement of goods.

Outlook

Seaborne steel trade volumes for the remaining part of the calendar will depend mainly on which way the wind blows in China. If production cuts are implemented seriously in adherence to its flat control policy and domestic demand improves further on the basis of supportive policies, then perhaps China may lower exports, which will pull down overall volumes.

*Correction - Iran volumes have been added and India's position in the charts has been corrected to 11th instead of 10th.