Indian fresh steel export bookings may remain quiet for some time. Know why?

Indian mills are entering a short-term bear zone in exports. After having concluded/booked deals in mid-Jul worth almost 350,000 tonnes (t) in longs and 230,000 t for HRCs respectively, sources say, now the market has turned very silent.

Why have exports turned quiet?

Fall in Chinese steel futures: The fluctuating futures have resulted in weak sentiments. On 6 Aug'21, the HRC Oct contracts on the Shanghai Futures Exchange (SHFE) were up RMB 39/tonne (t) ($6/t) compared to the previous day's close while rebar futures were up by RMB 6/t or less than a dollar/t d-o-d.

However, w-o-w, HRC futures lost RMB 397/t ($61/t) while rebar futures too shed RMB 358/t ($55/t). The futures indices have lost ground because of a new policy decision from the Chinese government on emission cuts.

This may reduce the stern production cut measures, which in turn can lead to higher crude steel supply that may lower finished steel prices in China. However, with the policy freshly announced, the market still has no clarity on the decision. Domestic spot prices in China, along with the futures, have been eroded. Traders have moved the sidelines, and the export market has fallen silent for now.

Traders yet to clear last positioned cargoes: With prices losing steam in the Chinese market, SteelMint learnt that the Indian mills' bookings reported a couple of weeks ago for Aug'21 shipments have not been liquidated yet. Because of the weak market sentiments, most traders were not able to find takers for these positioned cargoes. The inventory is thus still being held by the traders. Unless these get sold, traders will not take fresh bookings from the mills.

Two export tenders of 60,000 t and 18,900 t recently floated by two State-owned mills respectively were cancelled recently due to bid-offer disparities. Chinese export offers were lower by $30/t at $685-690/t levels CFR. The Indian mills expectations above $620/t fob levels. Yet, there were no takers.

"There is still time to sell, being Aug deliveries, but as of now, there are no buyers. Since prices have fallen sharply in China, traders have not been able to sell their positioned cargoes from India yet," informed a market source. Therefore, the next leg of export bookings for Sept shipments will take time to start.

Russians active in flat steel exports: The Russians are floating HRC tenders at aggressively lower rates. Offers to Vietnam were at around $910/t CFR, lower than the Indian prices. In addition, Russia's MMK was heard to have concluded an 80,000 t HRC export deal to Turkey although the price could not be confirmed.

On the other hand, HRC export offers from India to Vietnam were hovering at $930-935/t CFR.

Mills yet to book Sept shipments: Traders say Indian mills are yet to book their Sept shipments, even though they are offering $30/t lower compared to a week back. They need to return to the export market since at least 30% of their production has export exposure. However, the quietness is making them restless especially since they are unsure how long the bearish trend will continue. "Mills need to book for Sept shipments even if they have to drop their prices, But the market may remain weak for a fortnight, depending on the signals emanating from China," said another source.

Rising Covid cases in SE Asia: Cases are still high in South East Asia while China is seeing a Delta variant surge. Vietnam is in lockdown which has dented domestic demand there, making leading mills active in exports recently. But, Indian mills are impacted too since they are losing a traditional flat steel export market for some time. Vietnam has been the third highest importing country at 0.74 mn t after Belgium and Italy in Jan-Jun'21. In Jan-Jun'20, exports to Vietnam were the highest at 1.39 mn t.

Outlook

Indian steel exports had touched around 2 mn t in June, but may be lower at 1.25 mn t in July, as per SteelMint's estimates, although Aug volumes could be higher since mills had made decent bookings in Jul for deliveries in the current month.

However, Sept could see levels dropping because of the current market scenario. Moreover, some mills went into maintenance in Jul and may not have much allocation for Sept.