India to emerge as net steel importer in Q1FY'25

• Formosa's licence renewal spurs Vietnam imports
  
  
• Considerable volumes seen booked from China
  
  
• Comparatively cheaper landed prices lure buyers
  
  
• India's steel exports slow down y-o-y in Q1FY'25
  
  

Morning Brief: India is set to become a net importer of steel in the first quarter of financial year 2024-25 (Q1FY'25), reveals data maintained with BigMint.

Figures indicate that for three consecutive months - April to June, 2024 -- India's steel imports were higher compared to its steel exports. For instance, in April, imports increased to 0.75 million tonnes (mnt) against 0.56 mnt of exports. May saw imports hovering at around 0.60 mnt compared to a lower 0.56 mnt of exports. June is set to end with an alarming increase in imports to 0.60 mnt when pitted against 0.40 mnt of exports. Cumulatively, thus, in Q1FY'25 (considering provisional numbers for June), imports, are slated to rise to 1.95 mnt compared to 1.51 mnt of exports.

Factors that turned India into a net steel importer in Q1

Vietnam imports surge post-Formosa's BIS licence renewal: The Indian government renewed the long-stuck Bureau of Indian Standards (BIS) licence of Vietnamese steel major Formosa Ha Tinh in the first half of May, 2024. It may be recalled, these BIS certifications/licences were held back by the Indian government since April-May, last fiscal, in a bid to lower cheap imports inroads. And, the two countries facing the largest number of such pending renewals were China and Vietnam. The Indian Ministry of Steel had issued a clarificatory circular on 26 October, 2023 stating all steel products imported into India must have BIS licence/certification and be accompanied by a "mill test certificate" and be marked with ISI and BIS licence numbers.

With Formosa's recent licence renewal, import bookings from Vietnam into India were recorded by BigMint at around 295,000 tonnes (t) over May-June, 2024 (for July-August shipments) from nil in April.

In comparison, import bookings from Japan comprise a far lower 60,000 t.

It may be added that India has free-trade agreements with Japan, South Korea and Vietnam, a factor that is also supporting these imports.

Active bookings seen from China: The dragon country has been busy offloading its surplus on foreign shores at rock-bottom pricing. Although India does not have any free-trade agreement with China, it has been impacted nonetheless. Overall, Chinese import bookings into India touched 125,000 t in Q1.

Price differential makes imports attractive: The price differential between domestic trade-level hot rolled coils (HRCs) versus landed imported also encouraged end-buyers to opt for the latter. For instance, the domestic trade-level HRC, ex-Mumbai, averaged around INR 53,533/t ($641/t) in Q1 whereas the landed price of material imported from FTA countries was at INR 51,100/t ($612/t) and that from China, at INR 48,900/t ($586/t).

In May, in particular, the landed price from FTA countries was at 51,500/t ($618/t) whereas domestic ruled higher at INR 54,100/t ($648/t), a difference of around INR 2,600/t ($31/t).

The slightly lower pricing of the imported material tipped the scales in its favour.

Slower Indian exports: Indian steel exports, on the other hand, have become sluggish this fiscal (FY'25). Volumes over April-June, 2024 have provisionally slowed down 36% to around 1.51 mnt against 2.35 mnt seen in the same period in FY23. Plus, m-o-m, volumes have showed a steady decline too. It may be recalled, Indian mills opted for maintenance shutdowns which led to little or no allocations for HRC exports these past few months. In fact, mills refrained from offering in May-June amid the fall in global steel prices in the face of better domestic realisations. If domestic trade-level HRCs averaged INR 53,533/t ($641/t) in Q1, Chinese export offers in this period averaged $534/t FOB, allowing the Indians to prefer their domestic market.

Outlook

The bookings done now will arrive in July-August. Hence, imports may increase in the coming months. Meanwhile, exports will remain slow due to the summer vacation period in Europe, which is now a key market for Indian mills.