Indian steel market sentiments improve as govt removes export tax

• Steel index falls sharply as secondary longs prices erode
  
  
• HRC, longs and pellet prices recover some lost ground post-tax removal
  
  
• Buyers return, expecting further increase in prices
  
  
• Exports may resume as European buyers show some interest
  
  

Morning Brief: The India Steel Composite Index fell to a 23-week low for the week ending 18 November, 2022. It fell 2.3% to close at 144.90 points (148.4 points in the previous week).

The longs index lost 3.45% to 143.10 (148.20) points.

Flats dipped 1.17% to 146.80 (148.50) points w-o-w.

The longs index lost more sharply because secondary sector prices corrected downward substantially this week too.

Prices start showing uptrend
The index, contrary to expectations of a demand rebound post-Diwali, had been falling regularly since the last three weeks even though demand had been tepid prior to the onset of the festive season. But, still, it had been moving more or less in a narrow range before showing a sudden drop this week.

However, the removal of the export duty late on 18 November, has changed the onground scenario almost overnight! The index will possibly stage a rebound next week as a resurgence in buying is being seen across trade channels. "Buyers who had not booked for quite a while are now back in the market to restock," informed a source.

SteelMint heard that some traders increased HRC prices on Saturday by INR 500/t while in Ludhiana, the INR 1,000/t drop was reversed.

Prices of long products in the secondary segment also shot up sharply by INR 3,000-4,000/tonne (t).

Prices of pellets, a key raw material for secondary mills, increased by INR 1,000/t.
Iron ore, whose prices are revised fortnightly or monthly, has not been impacted yet but it is also expected to see an upward trend from here, post-duty removal.

Remarking on the export tax removal, Dilip Oommen, President, Indian Steel Association and, CEO, ArcelorMittal Nippon Steel India and Executive Vice President, ArcelorMittal, said: "The domestic steel industry is grateful to the Hon'ble Prime Minister of India for taking the decision to withdraw the export duty imposed on iron and steel items on May 21, 2022. We are also thankful to the hon'ble Union Ministers of Home, Finance, Commerce, and Steel for supporting the industry. This will re-energise and further motivate the industry to move forward with full confidence to put the steel sector towards an inclusive growth path."

Outlook
However, it is to be noted that although the export duty has been removed, there is no magic bullet to pull up export sales overnight.

But still, SteelMint learnt that Indian mills can get some opportunity to sell in Europe now. It seems some markets in Europe are opening up, although export volumes will be nowhere near early 2022 levels. Now mills can sell their usual grades (and not boron-added to circumvent the export duty) which are accepted in Europe. Boron-added found few takers in Europe.

Secondly, market expectations till the current week were that flat steel prices may drop further. Post-export duty removal, even if prices do not drop, they may not increase either since imports of HRCs from Japan are being factored in by mills. Imports are turning out to be cheaper.

Thirdly, with long steel having already recovered some of the price falls experienced so far, primary mills may show lesser propensity to cut their longs prices, mainly since the differential between BF and IF grades was rather narrow in the last few weeks. After falling sharply since last week, IF-grade rebar are ranging from INR 46,700-50,300/t, whereas BF-grade (ex-Mumbai) is at INR 55,800/t.

"Longs prices from primary players may either remain at similar levels or increase from here," added the source.

The India Steel Composite Index
The India Steel Composite Index is assessed on a weekly basis: every Friday at 18:30 IST, as per the weighted average prices based on manufacturing capacity and production.

SteelMint considers the Composite Index with the base year being 3 January 2020 (financial year 2019-2020) and the base value as 100. The Composite Index does not give the absolute price but a trend of the market. The Indian steel industry is broadly classified into the BF-BOF and the electric/induction furnace routes. Keeping this broad classification in view, SteelMint proposes to release the Composite Index by considering both production routes by manufacturing capacity and the production weighted method to compute the index for India. For details click to view the methodology document.