India's steel exports continue strong streak, rise 2% m-o-m in Feb'24

• Total shipments assessed at 1.13 mnt in Feb
  
  
• Active EU demand, higher shipments to UAE drive exports
  
  
• Dull global and China market outlook to weigh in near term
  
  

Morning Brief: India's steel exports increased 2% m-o-m in February 2024 after hitting a 20-month high in January. Exports climbed to 1.13 million tonnes (mnt) from 1.11 mnt in January, according to data available with BigMint. If current trends are any indication, exports of steel products are set to touch a level of 9 mnt in FY'24 compared with 8.7 mnt in FY'23 - an increase of over 3% on the year.

Exports break-up

Total outbound shipments of finished flat steel products were recorded at 1.03 mnt, with marginal volumes of long steel and semi-finished products being exported.

Notably, exports of flat steel constitute an overwhelming share of total outbound shipments. At over 6.6 mnt, exports of flats constituted over 75% of total volumes in 2023, as per data.

For the record, exports to the EU in February were over 748,000 t - around 66% of total shipments. The UAE and Vietnam were the other key buyers of Indian steel but volumes shipped to these countries were far lower compared with the EU.

Why exports edged up?

Active EU demand: Steel shipments to the EU remained strong on active restocking demand before exhaustion of quotas. As per reports, exports to the EU were inflated due to the fact that Q1 (January-March, 2024) quotas have been exhausted by the Indian mills. Thus, the current Indian offers can be considered for Q2 (April-June) deliveries. This is against the backdrop of domestic supply tightness in the EU. As export prices to this geography had increased by around $16/t since December 2023, suppliers have been eager to target the EU.

Exports to UAE surge: Steel exports to the UAE surged 84% m-o-m to over 69,000 t in February. Shipment increased after mills resumed export offers after a pause of three months. Among the key importers of Indian steel, the UAE and Vietnam have been showing preference for Chinese material due to price factor. This poses a direct threat in the form of shrinking of India's traditional export markets.

Outlook

The supply and demand balance in the global long steel products market has not improved and the positive expectations after the Chinese New Year holidays have not materialised. The general weakness in the housing and construction sectors due to the Chinese real estate crisis has weighed on steel demand and impacted Indian steel exports, too, especially billets. It seems Chinese exporters will continue to be aggressive amid falling domestic steel margins and dull demand, which will drive other Asian exporters (Japan, Vietnam, Taiwan and South Korea) to adopt a similar stance.

India's exports to the EU may fall slightly over shipping delays owing to the Red Sea impasse. The EU market is quiet as residential construction has declined substantially in northern Europe. There is very little activity and prices from domestic mills are firm. There has been some increase in steel imports from unusual origins such as China, Oman and the UAE. Other sources are not able to compete with domestic offers.