India's steel exports drop 4% in May'23. Will shipments rebound in June?

• HRC exports fall by over 30% m-o-m
  
  
• Jan-May'23 exports down 30% y-o-y
  
  
• Soft demand, volatility in steel futures weigh on outlook
  
  

Morning Brief: India's steel exports fell by 4% m-o-m in May 2023 to 0.90 million tonnes (mnt) against 0.94 mnt in the preceding month, as per provisional data maintained with SteelMint.

On a yearly basis, May exports declined by 31%. Moreover, on a cumulative basis in January-May'23, exports stood at 4.20 mnt against 6.09 mnt seen in the same period last year.

Product-wise break-up

Flats: Data shows that HRC exports fell by 32% m-o-m to 0.31 mnt in May against 0.46 mnt in April. However, galvanised steel exports rose by 29% m-o-m to 0.21 mnt from 0.16 mnt. Total flats exports fell by 11% m-o-m to 0.74 mnt from 0.83 mnt.

Semi-finished: Billet exports surged by 74% in May to around 101,527 tonnes (t) against 58,191 t in April. Longs shipments rose by 11% to nearly 53,346 t in the month under review from 48,250 t in April).

Region-wise break-up

Europe: Exports to the European Union (EU) inched down by 2% to 0.45 mnt in May against 0.46 mnt in April. Indian HRC export offers fell sharply from the levels of $805-815/t CFR Antwerp in April to $710-720/t in May. In early May, market activity in Europe was subdued due to sluggish demand and economic uncertainty. European mills were not offering in the market amid a healthy order book and maintenance shutdowns. In late May, Northwest European steelmakers returned to the market with fresh offers. However, European buyers were holding back from booking as they were anticipating that domestic prices would drop in June. This, in turn, resulted in very limited buying activity.

UAE: Volumes to the UAE decreased by 28% to 45,741 t in May compared with 63,140 t a month ago. In the beginning May, Indian exporters were not actively offering in the market but soon after exporters lowered HRC offers at par with Chinese offers which created a momentum in the market. Indian HRC (SAE1006) was assessed at around $630-635/t CFR, while Chinese offers to the Middle-East were around $620-630/t CFR. However after a sharp fall in China's SHFE HRC futures, offers fell to $600-605/t CFR levels. Thus, competitive offers from other sources and volatility in global market sentiments kept exports volumes lower.

Vietnam: Exports to this Southeast Asian country were almost nil in May. Indian mills remained absent in the Vietnamese market for a while. In addition, both domestic and overseas demand remained sluggish in Vietnam. Steel major Formosa Ha Tinh (FHS) announced a reduction in its monthly HRC (SAE1006, skin pass) prices by $65/t for June deliveries on 18 May at around $625-628/t CIF Ho Chi Minh. However, Vietnamese buyers were not accepting FHS's new prices and were expecting rebates from the company. Considering sluggish demand in the market, the company reduced prices further on 25 May by $23-40/t. Post-revision, prices were in the range of $580-600/t, depending on the volumes sold.

Nepal: While exports to other countries edged down, shipments to Nepal rose by 15% to 101,725 t in May against 88,612 t in April. However, volumes fell by 11% y-o-y against 114,130 t during the same month a year ago. The Nepalese government is focusing on infrastructure development to boost the country's steel demand.

Outlook: Steel exports may continue to decline in June, SteelMint believes. Although expectations of stimulus measures and interest rate cut in China are conducive to stimulating demand, market participants are of the view that real demand is still weak. Volatility in steel futures has further weakened buying interest. It is feared that the delay in China's steel industry recovery will negatively impact steel demand in all the Asian economies. Further, steel demand in the EU is expected to drop this year, and high inventories in the system as well as declining domestic prices in the EU are likely to result in lower interest in steel imports.