India's steel exports drop sharply in Jan-Sep'22 on subdued global cues, export duty

• Highest steel volumes go to Middle East & Africa
  
  
• Volumes to SE Asia plunge amid Vietnam's woes
  
  
• China's expected exports decline may offer opportunities to Indian mills
  
  

Morning Brief: India's steel exports over January-September, 2022 show a steep 39% drop to 8.93 million tonnes (mnt) against 14.60 mnt seen in the same nine months in 2021 (9MCY2021), reveals data maintained with SteelMint. Obviously, the 15% export tax imposition from the third week of May, 2022 had a deep impact on overseas sales from Indian mills, apart from the tepid global demand scenario.

Region-wise break-up

1. Middle East & Africa: This region was the highest importer in the period under review at 2.95 mnt against 2.53 mnt recorded in the year-ago period, an increase of 26%. Tier-1 mills, hamstrung by the export tax and overall low demand especially from Europe, had resorted to boron-added hot rolled coils (HRCs) exports post-May to the Middle East, although it found few takers. Indian mills had to compete with China's aggressive pricing in this market.

2. Europe: The Continent saw a steep 45% drop in imports from India y-o-y to 2.44 mnt against 4.46 mnt in the same period last year. Europe has been tremendously constrained by high energy prices and the resultant inflation. As a result, end-user industries went slow in procuring, while many of its own high-profile mills shut shop temporarily. Indian mills, meanwhile, felled by the export tax, found it tough to find buyers for its boron-added material in Europe as well. Europe is predominantly a flat steel export market and more than 60% of India's steel exports comprise the same. Consequently, the flats segment from mills here were dealt a body blow.

3. Southeast Asia: This region saw the third-highest export volumes entering its shores from India. However, volumes dropped the sharpest, by 49% y-o-y to 1.38 mnt against 2.69 mnt registered in the same period last year. Vietnam has traditionally been a good market for India. However, this year, this country itself has been undergoing many challenges. It had a Covid resurgence which dented domestic demand. That apart, slow construction activities also impacted demand. On the other hand, domestic crude steel production was up, which forced Vietnam's own mills to turn exporters. Formosa, a prominent domestic mill, became more active in exports as home demand tapered off.

North America: Exports to this geography saw a 56% increase. However, volumes were small, at 0.58 mnt (0.37 mnt in 9MCY2021).

4. East Asia: A 91% plunge was noticed for this region (comprising Japan, Korea and Taiwan), but volumes were very small, at 0.19 mnt, against 2.10 mnt in 9MCY2021. Here, too demand was weak with most of these countries turning exporters themselves.

Central & South America: A 44% y-o-y drop was seen for this geography. Volumes dropped to 0.14 mnt against 0.26 mnt in 9MCY2021.

5. Asia Pacific and CIS: Volumes to these two regions dropped 13% and 63% respectively. Asia Pacific saw 0.11 mnt entering its shores against 0.13 in the same period in 2021. Volumes to CIS dropped 0.003 mnt (0.01 mnt in (9MCY2021).
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Outlook
With the export tax removal, there is a sense of positivity that overseas sales will eventually improve from here, although, of course, global demand is still down and there is no magic bullet to increase sales immediately from here. However, it is heard that Indian mills are not exactly chasing bookings but are keen to secure volumes if offers match or are a little lower compared to domestic.

Volumes can increase because mills will resume exporting normal HRCs instead of boron-added.

China's steel exports are expected to drop because of the production cuts and the winter season which will further dampen demand. In such a scenario, Indian mills have scope to enter or regain markets that the giant can vacate in the near to medium term.

Moreover, prices are also expected to move up and encourage exports. It may be recalled global bulk imported scrap have already increased in the last one week, which may impact finished prices as well.