India's steel exports drop over 30% in Jan-May'23. Rebound unlikely soon
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- All regions show decline except for EU
- Previous bookings boost EU volumes
- Global factors weigh on short-to-medium term
Morning Brief: India's steel exports dropped a steep 33% m-o-m over January-May 2023 to 4.10 million tonnes (mnt) as per provisional data available with SteelMint. The volume in January-April 2022, it may be recalled, was at 6.10 mnt.
Volumes fell on a m-o-m basis too. May 2023 exports were down nearly 16% to 0.80 mnt against 0.95 mnt recorded in April.
Segment-wise break-up
Total finished flats exports were lower by 11% m-o-m at 0.75 mnt in May against 0.84 mnt in April. Within flats, hot rolled coils (HRCs) showed a 32% decline while galvanised recorded a healthy 29% increase -- volumes have been rising since the recall of the export tax last year.
However, semis' exports showed a sharp upsurge at 0.10 mnt (58,000 tonnes). Longs rose a moderate 11% m-o-m to over 50,000 tonnes (48,000 t).
Other than Europe, all of India's steel exporting geographies saw a decline in the period under review.
Europe: The European Union (EU) led the exports chart, up 23% in January-May, 2023 to 2.14 mnt against 1.74 mnt in the same period last year. However, these were remnants of earlier bookings that inflated the volumes. Overall, the EU market remained subdued throughout this year, characterised by sluggish demand and an uncertain economic scenario. It is no surprise that, on a m-o-m basis, May volumes remained flat at 0.51 mnt, despite mills lowering their offers from $775/tonne CFR Antwerp in early May to $676/t by month-end. Domestic European mills were quite overbooked and also in maintenance mode and thus not offering much in their domestic markets. But, EU buyers huddled into a wait-and-watch stance, expecting the domestic as well as import prices to fall further.
Middle East & Africa: Exports to this geography plunged 64% to 0.76 mnt (2.11 mnt) in the months being reviewed. Even on a m-o-m basis, volumes were down 26% to a mere 0.11 mnt (0.14 mnt).
Indian sellers had not been offering in this market for some time since the prices being floated by competing countries were prohibitively low. However, to inject some momentum in a dull market, May saw Indian mills competing with downwardly mobile Chinese offers to the Middle East. Thus, Indian offers hovered at around $660/t CFR in early May against the Chinese $625/t CFR. But, Indian offers plunged to around $605/t CFR levels later in the month amid volatile Chinese steel futures (with Chinese tags touching $600/t CFR), making exports unviable for the Indians.
South Asia: Volumes dropped 37% over January-May, 2023 to 0.49 mnt (0.78 mnt). On a m-o-m basis, the decline was a much lesser 9% to 0.11 mnt (0.12 mnt in April).
M-o-m, exports to Nepal were up 14% but down 27% in January-May. This Himalyan kingdom mainly buys billets from India. However, of late, it has been attempting to become self-sufficient in semis and thus has been focusing on procuring sponge iron from India, which has led to a drop in steel exports. Overall, the South Asian market performed poorly on account of currency issues which saw a depletion of foreign exchange reserves, which, in turn, made opening of new LCs a challenge.
Southeast Asia: This region, once upon a time, used to be dominated by Vietnam. However, Vietnam has looked like a dried-up market for major part of the current calendar, focusing more on domestic supplies to address the scant local and overseas demand. That apart, it has become an exporter itself, eyeing Indian buyers thanks to the free trade agreement forged between both countries a few years ago.
May saw nil exports to Vietnam while January-May volumes from India plunged 58% to 0.18 mnt (0.43 mnt).
Overall, volumes to Southeast Asia decreased a steep 62% in January-May to 0.30 mnt (0.80 mnt) and by 96% m-o-m.
Outlook
India's steel exports are likely to fall further in June on the back of the sustained subdued global demand scenario. Much will depend on which way demand turns in China after a new set of policy measures gets announced. The Chinese government recently pledged to roll out more measures to "enhance the momentum of development".
In the EU, construction demand is expected to show a dip while recovery in automotive will be moderate. These factors will weigh on import demand from this region.
No major demand shift is expected in Southeast Asia in the short-to-medium term.
