India's steel exports fall 15% in Apr-Nov'23. What lies ahead?

• India's total steel exports may fall 25% in CY'23
  
  
• China, falling global prices, good home demand keep exports down
  
  
• Improved global macro-economic factors may revive exports next year
  
  

Morning Brief: India's steel exports fell by about 15% y-o-y in April-November, 2023 (8MFY'24) to around 5 million tonnes (mnt) compared to 5.85 mnt in the corresponding period of last fiscal, reveals provisional data maintained with SteelMint.

M-o-m, November 2023 exports were at 0.32 mnt, provisionally down 10% compared to 0.36 mnt in October. On calendar year basis, exports over January-November, 2023 dropped 25% to 7.33 mnt against almost 10 mnt recorded in the same period in 2022.

Considering the full year's trend, Indian mills may possibly end CY'23 with steel exports down nearly 25% to around 8 mnt, from 10 mnt seen in 2022.

Product-wise break-up

Flats: Data reveals, flat steel exports dropped 5% to 4.10 mnt in these first eight months of FY'24 against 4.25 mnt in the same period in FY'23.

The most exported products within flats -- hot rolled coils (HRCs) - however, saw an almost 30% increase to 1.70 mnt in this period compared to 1.31 mnt in the same period last fiscal as volumes were higher over April-August compared to the later months.

Indian mills were heard to have diverted for quite some time in the past their HRCs in-house towards production of galvanized and other value-added products, whose exports are more lucrative.

As a result, galvanized exports were up manifold to 0.92 mnt (0.36 mnt) in the period under review.

Longs: The general slowdown in the longs market has been persisting for long now. This segment dropped almost 20% to around 0.40 mnt (0.50 mnt). Overall, the global demand for longs is highly muted with construction and housing still a subdued area. Plus, India is facing competition from Egypt, Algeria, the UAE and Saudi Arabia which are selling cheap. Exports were active mainly from countries like Egypt and Algeria which have not been subjected to anti-dumping or countervailing duties so far.

That apart, China's increased exports at rock-bottom prices also offered stiff competition.

Billets: Billet exports plunged 53% to 0.52 mnt (1.11 mnt). With finished demand slow, semis like billets have seen scant exports activity.

Country-wise break-up

Volumes to Vietnam, Middle East plunge: Exports to Vietnam plunged 75% y-o-y to 0.16 mnt in the period under review (against 0.64 mnt in 8M'FY23). Vietnamese buyers preferred Chinese and domestic materials which were cheaper. Chinese offers to Vietnam fell from $700/t levels around March-April, 2023 to as low as $570/t in June and again in November.

Exports to the Middle East fell over 30% y-o-y in this period to 0.36 mnt (0.52 mnt). Sporadic deals did happen through the year although the Middle East market had showed a higher propensity to buy from China.

Exports to EU rise, as quotas get fulfilled: Exports to Europe rose 32% to 2 mnt (1.53 mnt) in April-November, 2023. The market overall was dull for the better part of the year and saw some pre-winter restocking activity in the second half of the calendar. Earlier in the year, quotas were fulfilled and offers were higher too, which had raised volumes.

Factors that impacted exports over Apr-Nov'23

Highly competitive Chinese offers: China continued to export steel at highly competitive prices throughout the year to offset the losses incurred from inadequate home demand. Average Chinese global offers for benchmark hot rolled coils (HRCs) plunged to as low as $532/t FOB in October 2023 which edged out Indian mills from the market completely for the two months of October and November.

Indian mills experience decent domestic demand: For April-November 2023, cumulative crude steel output increased 14.5% y-o-y, underscoring the fact that there was domestic demand pull, especially ahead of the many state elections. Production touched 94 mnt against 82 mnt in the same period of 2022. Prices too were lower y-o-y in this period, benefiting buyers. For instance, over April-November, 2023, benchmark domestic HRC prices averaged less than INR 57,000/t ($683/t) against over-INR 61,500/t ($737/t) in the same months of last fiscal. Similarly, rebar prices averaged INR 55,300/t ($663/t) against INR 60,500/t ($725/t) in the period under review.

Demand from infrastructure was good with the government having given a boost to the same. Housing and automotive demand was decent too. As per real estate consultant Anarock, the Indian residential property market witnessed an all-time high in housing sales in the July-September quarter.

Indian mills lower export allocations amid maintenance: Supply issues cropped up in August-September as mills opted for maintenance shutdowns. This led to production cuts. With scarce inventories at their disposal, mills focused more on domestic allocations rather than exports.

Falling global prices dent realisations: Global prices started falling from April onwards which dented realisations, making Indian mills focus on the more profitable domestic market. For instance, India's HRC export offers averaged $597/t FOB in April-November compared to domestic's $683/t (INR 57,000/t) in dollar parity. Thus, although export volumes were comparatively higher especially over March-May, 2023, these started dropping thereafter as cautious mills shrank their export allocations.

Outlook

Next year may turn out better for Indian steel exports as there are indications of improvement in global macro-economic indicators. Eased inflation and interest rates may whet global demand. China too may see better domestic demand because of the stimulus measures, a scenario that may allow its mills to focus more on home demand.

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