India's semi-finished exports may increase in near term

• Export tax on iron ore, flat steel will force mills to explore semis' overseas sales
  
  
• Buyers wary of buying CIS billets over delivery uncertainty
  
  
• SE Asia, Middle East on Indian mills' radar for billets exports
  
  

Morning Brief: Exports of semi-finished products like billets and slabs are likely to increase in the near term, as per SteelMint's estimates. This is because the government has left this segment untouched in its recent announcement, slapping an export tax on various iron ore and finished product categories.

The government, on Saturday, announced a series of export taxes across steel-related commodities, including iron ore, pig iron and flat rolled. In the case of iron ore pellets, which currently attracts nil export duty, a 45% export duty has been imposed. In the nine other classes of iron ore and steel products, a 15% export duty has been slapped. This includes flat-rolled products of iron or non-alloy steel. That apart, the existing 30% export duty on iron ore and concentrates has been raised to 50%.

Although billets and semis have been kept untouched so far, rumour mills are rife that some duty could be slapped on these as well in the near future. However, as of now, no concrete news has emerged from government sources.

Factors that may increase semis' exports

• Uncertainty over CIS sourcing: Although prices from CIS sellers, a force to reckon with in the global billets trade, have dropped, traders inform that buyers in many regions are wary of placing orders for the same being unsure of the delivery time against the Russia-Ukraine war backdrop. Prices have dropped 15% from the one-month-ago levels of $704/t FOB Black Sea category to the current $600/t FOB levels and 10% w-o-w.
  
  

It may be noted that last year, Russia exported billets/slabs of around 15 million tonnes (mnt) and Ukraine, around 7 mnt. So, a substantial void has been created and there are strong chances that buyers of CIS material would shift their sourcing focus to India.

• SE Asia, Middle East on radar: India has been exporting around 5-6 mnt of billets/slabs since the last couple of years. The main destinations were Nepal, China and SouthEast Asia. But China is currently out of the market because of its production cuts and post-Covid return to domestic procurement. So, India will not be able to replicate the 2020 trend this time. It may be recalled, China had bought over 3 mnt of billets from India in 2020, post its first Covid outbreak, to kick start its infrastructure projects.
  
  

It seems, South/Far East Asia and Middle East are likely to focus on sourcing more from India as both actively bought from CIS previously.

• China's reduced slab exports an opportunity: China became rather active in slabs exports in the last few months, after Russia-Ukraine, which jointly controlled around 12 mnt of this market, became absent due to the war and ensuing sanctions.
  
  

Meanwhile, India's 15% export duty on flat rolled products of 600mm or more, clad, plated or coated means hot rolled and cold rolled will be impacted. Therefore, Indian mills will be only too keen to explore alternate export materials. In this case, another semi-finished product - slabs.

It is expected that once the Chinese domestic market picks up post-lockdown, its slabs exports to the European Union will reduce. This will open up Indian mills' opportunities for slab exports to Europe.

Global slabs trade comprised almost 30 mnt in 2021.

Outlook

With the export market for finished products suddenly hedged in by the 15% export tax, Indian mills will look to expand their export opportunities in semis - billets and slabs. Globally, total semis trade touched around 70 mnt in 2021.

SteelMint estimates that the 6 mnt per annum billets volume can climb to 8-10 mnt if the market that Russia-Ukraine serviced shifts to India.