India: Steel mills inactive in export market at present; exports drop 10% in Sep

There have not been any significant export bookings from steel mills since the second week of September 2020. Traders have not heard of any large or significant new bookings for November shipments, sources informed SteelMint.

"No one is active right now, whether in longs flats or semis. All the mills are focused on the domestic market at present," a trader said.

There has been news of only small lots of either 500-1,000 t of consignments near destinations or bookings from SAIL to Nepal. Other than these, there are no major bookings seen from India. October bookings, which are getting delivered now, had actually been made in August.

Indeed, sources say that mills do not have any allocations currently and that 25-30% of October shipments may spill over to the next month. It is too early for the mills to predict allocations for December. They prefer to see how the domestic market pans out in November. The basis that, they would likely decide in early November whether they would have allocations for December, it is learnt.

Export volumes in October, sources predicted, will not be more than 1 mn t, in which flats are likely to be around 40% and the balance comprising semis and longs.

Estimates for November are difficult at this juncture since the volumes would be lower than October's and could be not more than 700,000 ~ 750,000 t, hazarding an industry insider.

These estimates are a far cry from the record 2.56 mn t of exports notched up by Indian steel mills in June and 2.49 mn t in July. SteelMint's provisional figures for Aug and Sept are at 1.8 mn t and 1.58 mn t respectively.

Pricing- Current rates, ex-mills, are around $ 530-540/t, which would be around INR 40,000/t in rupee terms. If inland transportation costs, ranging from $10-20/t, are added, FoB prices are not workable. Even FoB levels equivalent to ex-mills' prices won't find any interest overseas. "This price is very high and impossible to get buyers," said a market source, adding that it is better not to offer at such a high price in a market where there are no takers. Mills would rather focus on the domestic market, which has rebounded well. Good demand is being generated from the automotive and oil and gas segments. There are expectations that riding the government's infrastructure push, construction activities will resume soon.

Will the domestic market sustain?

Figures released by the Society of Automobile Manufacturers (SIAM) reveal that in the month of Sep '20, the auto industry witnessed improvement in the sales of passenger vehicles by 26.45% and two-wheelers by 11.64% although sales of three-wheelers registered degrowth of -71.91%, as compared to September 2019.

Expectations are that Oct '20 auto figures would be even better. Two-wheeler manufacturers are targeting more than 100% production, looking at increased demand against the backdrop of the pandemic which is forcing people to avoid public transport.

But many feel increased auto sales are driving the sentiment, not the demand since this segment consumes only around 30% of steel. The lion's share is enjoyed by construction and manufacturing. "Many auto dealers are stocking up, fearing uncertainty fuelled by a second wave in the coming months. They feel the festive season will drive up sales. However, we do not know what the scenario will be like, post-festive season," an auto dealer voiced caution.

"Truly, the future is difficult to predict. Nobody believed India's demand would rebound so sharply post-lockdown. From a scenario of 100% exports in March-April, mills have reached a situation of selling 100% in the domestic market in October," observed a trader.

-By- Madhumita Mookerji