India: Mills high on exports; Mar volumes to touch over 1 mnt

The last few days of February, 2021 have seen a slew of export deals being clinched by Indian steel mills. While these supply consignments are being booked in February, the shipments will take place in Mar'21.

In fact, the bookings have been so robust that SteelMint understands Mar'21 export volumes, including longs and flats, would cross over 1 million tonnes (mnt), easily surpassing February figures, which are likely to be around 0.6-0.7 mn t. Most mills are sold out for Mar'21 and whatever offers are pouring in at present are for Apr'21 shipments.

"The outlook for February is that exports are likely to creep up because domestic realisations have gone lower. It was heard that key mills have booked rebars for exports," said a source at a primary mill.

Longs

In fact, February itself has seen mills active in the seaborne area with around 1.7 lakh tonnes of rebar cargoes being booked for Hong Kong and Singapore in the last 10-15 days at a price level ranging across $620-630 cfr ($590-600/tonne fob) with more negotiations under way. These are Mar'21 shipments and JSW Steel and JSPL, both of which have booked these supply consignments, have time till the end of Mar'21 to complete the same. Thus, they will need to start shipping out the material by end of February.

Pricing

Such a bullish scenario will have a direct fallout on domestic prices. With exports highly viable at present, mills are now not under any pressure to reduce their domestic prices and the buzz is that March could see domestic prices rising once again. As said a source, "Now, mills have the export buffer and so can afford not to reduce domestic prices. They may even raise prices again."

It is to be noted that the offer prices for the 1.7 lakh tonnes rebar cargoes are higher compared to the $580-590/tonne fob levels at which deals had been struck a couple of weeks back. Such rates were lower from the mid-Feb'21 BF-grade retail rebar prices (12-32 mm) of around INR 49,000-50,000/tonne ($680) FoR Mumbai, excluding the 18% GST.

But mills had compromised at that juncture since January's domestic prices had been robust. In fact, January's domestic realisations were the highest in the last one year, goading mills to keep exports low in that month. Prices fell after January 15 and February saw some corrections.

It may be recalled that primary segment prices had risen a whopping INR 8,400/tonne in December m-o-m. And, thanks to higher input costs and supply crunch, both benchmark HRC and CRC domestic prices had peaked in the first week of January, after which these started climbing down. Average monthly trade prices of HRCs (2.5-8 mm), ex-Mumbai, climbed to a record INR 56,800/tonne in January while CRC (0.9 mm) rates, ex-Mumbai, hit INR 68,200/tonne, highest for both segments in the last one year. Average prices in February for HRCs have cooled down a bit to INR 54,300/tonne and CRCs to INR 65,800/tonne.

Flats

In HRC, Indian mills are also exploring export opportunities thanks to a subdued domestic market. Mills recently resumed HRC export offers to Vietnam after a long gap, at around $740/tonne CFR. For UAE, major steel manufacturers are eyeing around $745-750/tonne cfr and, for Europe, offers are hovering around $825/tonne cfr for March-April shipments, it is heard.

Reason for high exports

Prices are always a function of demand and supply. Exports volume are increasing essentially because overseas demand is going up, especially in the aftermath of the Chinese New Year holidays, when restocking demand flooded the market. Consequently, global prices increased and Indian mills are taking advantage of the bull period.

A source indicated that the mills had allocations for March but were waiting for the right price for clinching the deals. And with demand up, they can command the higher prices.

~Madhumita Mookerji