India's steel exports hit 8-month low in Jul'24. Short term looks challenging
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- China out-prices India from key markets
- EU quotas save the day for Indian mills
- Output cuts lower Indian export allocations
Morning Brief: India's steel exports fell to an eight-month low and by 15% m-o-m to around 0.35 million tonnes (mnt) in July 2024 against 0.41 mnt seen in June, reveals data maintained with BigMint. The last time volumes fell below the July 2024 level was in November 2023 (0.32 mnt).
Exports have put up a consistently poor performance this financial year, falling every month, BigMint data reveals.
Country-wise break-up
The EU continues to be India's leading destination at 0.14 mnt, with the quotas somewhat a saving grace. But here too volumes have been falling m-o-m since February this year.
Volumes to Vietnam are nothing to write home about at over 8,000 t in July while those to the Middle East are at a highly modest 17,000 t.
Nepal is offering some support with volumes averaging a little over 40,000 t this calendar.
Factors dragging down India's steel exports
China's predatory pricing spoils Indian chances: China has been seemingly exporting its economic crisis overseas at predatory pricing. Naturally, it is keeping its export allocations on the higher side to combat the low demand at home. Resultantly, several countries and geographical regions, including the European Union, Vietnam, Turkiye, and Malaysia are launching anti-dumping probes against China amongst other countries in attempts to stall this exports onslaught which is hurting their domestic mills.
As far as India is concerned, BigMint data reveals that it has been priced out of its two traditional markets, Vietnam and Middle East, since May this year. It is just not viable for Indian mills to counter the Chinese offers. For instance, Chinese offers to Vietnam in July were at as low as $527/t CNF HCMC, which fell even further in August. These offers are down by a steep $82/t since January this year.
The story is similar for the Middle East. Offers fell by almost $70/t to $550/t CNF Abu Dhabi from $619/t early this year.
Maintenance schedules lead to lesser export allocations: Dull domestic demand forced Indian mills to opt for unscheduled maintenance shutdowns which resulted in production cuts. For instance, India's crude steel production was at 12.50 mnt in July 2024 but consumption at a lesser 11.50 mnt. The untimely maintenance schedules helped the mills to attune production to demand, which also led to lesser export allocations. A huge imports surge is snuffing out domestic demand. India's steel imports are up around 48% y-o-y in H1 (January-June, 2024).
Dull global demand scenario: Global demand is also not particularly looking up, especially in Europe, and further weakening export opportunities for Indian mills. As per the latest Eurofer report, the negative trend in the steel market observed in the first half of 2023 has persisted and become more acute over the last three quarters. The severe consequences of the war in Ukraine and the deteriorating manufacturing outlook, along with the overall economic environment, continued to take their toll. Apparent steel consumption in the EU decreased by 3.1% in the first quarter of 2024. And, evolution of steel demand for the rest of the year remains subject to very high levels of uncertainty.
Outlook
With various economies launching anti-dumping probes, exports of hot-rolled coils and other flat products, which form the bulk of India's steel exports, will increasingly become a challenge.
Looking at the short term, the present challenges of predatory pricing from China will continue. Domestic demand may look up from the third quarter by when imports may also slow down. Both these factors will support Indian mills.
