Indian HRC imports from Russia spurt; Is the steel market jittery?

• HRC import volumes from Russia spurting since June
  
  
• Sellers are two leading Russian mills, buyers comprise traders, pipe-makers
  
  
• Price viability may not sustain amid strong roubles
  
  

Morning Brief: A vessel 'Akson Serin' carrying around 24,000 tonnes of hot rolled coils (HRCs), originating from St Petersburg, Russia will be reaching Mumbai Port on 25 July, as per information available to SteelMint.

The vessel carries significance in the fact that, interestingly, the last couple of months have seen a sudden spurt in Russian HRC import bookings from India. In fact, data shows that around 150,000 tonnes of Russian HRC cargoes have been booked from Indian buyers since June. So far, the exporters have mainly been Russian steel and mining heavyweight Severstal and NLMK- one of the four largest steel companies in that country. The buyers, on their part, SteelMint learnt, are mainly traders and some of the pipe manufacturers.

Russia exported more than 30 mnt of steel in 2021 in which the share of the European Union was a leading 28% or 8.39 mnt.

Meanwhile, data maintained with SteelMint reveals that India's annual steel imports in 2021 comprised 3.94 mnt, with HRC and plates comprising 28% or 1.10 mnt. Russia's share in total imports was a mere 56,000 tonnes.

Why is there a sudden spurt in Russian HRC imports?

Sources indicate that small parcels of electrical steels usually keep entering India. But the recent cargoes are a pointer to a more macro shift in trade flows.

The key reason is the Russia-Ukraine war, of course. The sanctions imposed by the western countries mean Russian commodities, including crude oil and refined petroleum products, coal and other solid fuels and iron and steel, cannot enter the European Union (EU) - its largest importing geography across goods.

With the sanctions closing in on Russia, its steel mills' inventories are building up, forcing them to explore alternate markets, with aggressive offers.

For instance, landed prices of the HRC cargoes booked by Indian buyers are in the range of INR 51,000-66,000/t in rupee parity to the dollar. In comparison, trade-level HRC prices averaged INR 62,000/t in June. Thus, Indian buyers, finding price viability in these imports, are naturally showing interest.

However, it may be noted that the parcels already booked are not very large, ranging from 24,000-35,000 tonnes. Only one consignment, so far, is of 80,000 tonnes, and slated to arrive on the west coast of India, in the first week of September.

It is also heard that these deals are not being concluded in dollars but in roubles or Chinese yuan, since Russian banks have been excluded from SWIFT, an international payment system, as part of the sanctions.

Outlook
These import volumes are not significant yet. Nonetheless, these have shaken steel market sentiments. If the volumes gain a critical level, then, obviously, Indian mills will have to reduce their prices to retain the import parity. "It is not that domestic supply is scarce which is forcing buyers towards imports. There is enough domestic material available and if imports increase, mills will reduce prices to match imports. But, yes, the developments have unnerved the market a bit," said a source.

However, the import volumes, going forward, may not be that significant, and for two reasons: One, the Russian rouble has appreciated against the dollar, and is at 57 currently. Moreover, it is heard, the deals are being done in yuan for onward payment in roubles which may not ultimately offer price viability. "Had prices been lower, traders would have continued to import. However, till now, no fresh bookings have been heard of," reasoned the source.

Secondly, Indian mills have the buffer to cut prices to bring these at parity with imports so that these lose viability. There is that export inventory surplus, which mills can divert towards stemming imports in a bid to protect their turf.