India's galvanized steel exports rise over 80% in CY'23 on European buying

• Indian coated steel production increases on new capacities and consolidation
  
  
• EU: Crude steel production falls, whereas auto reports better numbers
  
  
• Indian mills are following CBAM guidelines
  
  

Morning Brief: India's galvanized steel exports rose more than 80% to nearly 1.50 million tonnes (mnt) in calendar 2023 (CY'23) compared to a much lower 0.81 mnt in CY'22. Data tracked till the last six years shows that CY'23 registered the highest exports of this material in this period, the second-highest being 1.39 mnt in 2018.

Last year, galvanized exports' share doubled to 22% share (1.50 mnt) in the entire flat steel exports basket of 6.71 mnt against 11% in CY'22.

Reasons for high galvanized steel exports

Indian mills hike downstream capacities: Indian mills have been raising their downstream flat steel capacities either through acquisitions or capacity expansions. This raised India's production volume of galvanized steel by 17% last year to 12.50 mnt against around 11 mnt in CY'22 while apparent consumption also rose but by a slightly lesser 15% to 12.26 mnt (10.64 mnt). JSW Steel, which has the highest galvanized capacity in place, showed a 33% y-o-y increase in output in CY'23 while SAIL recorded a 25% rise. Tata Steel's inched up 3%. Others like AM/NS India also showed a marginal increase.

JSW Steel, through its subsidiary, JSW Steel Coated Products Limited, acquired National Steel and Agro Industries (NSAIL) last year which will boost its value-added basket.

AM Mining, part of AM/NS India, acquired Uttam Galva in CY'22. The latter has manufacturing facilities in Khopoli, Maharashtra, with a wide basket of downstream value-added products.

Europe's crude steel production skids: The European Union (EU-27) saw a decline in crude steel production by 7.4% last year over CY'22 amid high energy prices, inflation, falling currencies and the overall slump in steel demand, encouraging steel imports at competitive prices from India.

India's flat steel exports have the highest exposure to Europe among its importing countries and it may be emphasised that galvanized exports to Europe alone rose a whopping 130% to 1.04 mnt last year compared to a far lower 0.45 mnt in CY'22.

The preference from Europe pulled up the overall export volumes sharply in CY'23. The EU's quotas in galvanized steel imports from all countries cumulatively amount to 5.2-5.3 mnt in which India's share is around 0.8 mnt annually, and translates into 0.2 mnt quarterly. This volume is lesser than Korea's 1.05 mnt but higher than China's 0.5 mnt.

Europe's car sales accelerate: Even as Europe's crude steel production fell, its car sales accelerated by over 9% y-o-y to more than 11 million units in CY'23, which is actually a rather good performance considering the 25% downward slide in CY'20. Since galvanized is a key input material in vehicle manufacturing, European automotive players resorted to imports, especially from India.

Outlook

India aims to seek an easing of the EU's steel import quotas through a new trade deal as Indian mills are struggling to sell overseas amid competition from China. If such a deal fructifies, India's galvanized exports to the EU will possibly rise. But, in the absence of such an agreement, galvanized exports will either remain range-bound or decrease, as per BigMint's estimates. The EU's quota system helps to protect its own steelmakers.

There are expectations of an increase in the EU's crude steel production and also its car production and sales in CY'24. In such an eventuality, galvanized exports from Indian can drop as automotive majors may show a propensity to source domestically.

Thus, the future of galvanized and coated steel exports looks rather ambivalent at this juncture,

CBAM impact

Meanwhile, no immediate impact of CBAM is seen on steel exports as mills are declaring necessary values as per the new declaration format Further, so far, there have been no "non-compliance" penalties from EU authorities.

Under the current CBAM requirements, which came into effect October 1 onwards, companies exporting to EU will have to mandatorily declare the carbon emissions in their products shipped on a quarterly basis.

The declarations on carbon emissions can be made either along with the shipments or be sent at the time EU importers pick up deliveries from various ports.