India's steel exports rise in Aug'24 after 5-month gap. But, Q3 look bearish

• Aug volumes fall 28% y-o-y amid lesser allocations
  
  
• Nepal's infrastructure boom a boon for Indian mills
  
  
• EU dumping probe hangs like Damocles' sword in Q3
  
  

Morning Brief: India's steel exports rose provisionally m-o-m in August 2024, after a five-month gap. Volumes were up 32% to 0.46 million tonnes (mnt) against 0.35 mnt in July 2024. But these were down 28% y-o-y compared to 0.64 mnt in August 2023. Also, cumulative volumes over April - August of FY'25 plunged over 38% to 2.32 mnt from 3.76 mnt seen in the same period in FY'24.

Country-wise break-up

The EU continues to be India's leading destination at 0.15 mnt. But here too volumes were up a mere 3.5% m-o-m. August broke the fall seen since February this year.

Volumes to Vietnam fell a sharp 18% to under 7,000 t in August and to the Middle East by 6% to less than 16,000 t.

Nepal, on the other hand, offered some support with volumes rising 62% m-o-m to nearly 75,000 t.

Factors that influenced India's steel exports in Aug'24

Indian mills unable to match rock-bottom Chinese offers: China's aggressive pricing kept India's key export destinations like Vietnam and Middle East suppressed.

China's average export offers in August plunged to a rock-bottom $474/t FOB, the lowest since BigMint has been tracking this data.

August offers to Vietnam averaged $498/t CNF HCMC, lowest since July 2020's $474/t. Middle East buyers enjoyed an average $519/t CNF Abu Dhabi -- the lowest since $457/t seen in July 2020. Naturally, Indian mills found it absolutely unviable to match these prices and have been staying away from the market since May this year.

Nepal's infra needs fuel steel demand: Exports to Nepal pulled up the overall figure in August as almost all key destinations remained a damp squib. Nepal has been exhibiting a growing demand for steel, driven by growing urbanisation and the resultant infrastructure and industrialisation push. This scenario is fuelling longs and construction steel demand from India for dams, hydro power projects etc. The government's hydro power development plan envisages creation of 28.5 GW by 2035, for use domestically and for exports to India and Bangladesh.

Plus, the Himalayan kingdom had inked an agreement with China to undertake Beijing-backed infra projects, including the Belt and Road Initiative (BRI).

Importing steel from India is highly viable for Nepal because of the geographical proximity and logistical viability.

Crude steel production flat, allocations measured: India's crude steel production provisionally remained flat m-o-m in August at 12.29 mnt. Some mills resumed production after taking maintenance in the previous months. This factor, along with subdued global demand, also propelled mills to keep export allocations on the lower side. Thus, exports were up m-o-m, but fell sharply y-o-y. "We lost a good volume with a large mill in India because it did not have matching production -- only for the one booked previously," said a buyer from the EU.

Slack global demand: Demand for steel is still slack globally. Supply chain issues, thanks to active geo-political challenges, and the overall deterioration in the industrial and economic climate across key consuming geographies, including China, the EU, the US and South Asia, have impacted Indian steel exporters hard. Many see China's economic slowdown being exported in the form of commodity dumping across the world, including steel, luring buyers away from other exporting countries.

"The EU market is still quite slow," a EU buyer corroborated to BigMint.

Dumping probes create restricted environment: Several anti-dumping investigations are under way, which are significantly creating a restricted environment for Indian exports of hot rolled coils, in particular. The European Commission announced in August HRC anti-dumping investigation into Egypt, India, Japan and Vietnam.

Turkiye revealed preliminary results of an anti-dumping investigation into HRCs originating in China, India, Japan and the Russian Federation. For Chinese producers, the dumping duties were decided at 20.5-57.7%, for Indian producers, at 11.6-18.3%, for Japanese producers, 39.1%, and for Russian producers, 16.1-23.6%.

In July, Vietnam's Ministry of Industry and Trade launched an anti-dumping probe into certain types of HRCs originating from China and India. Malaysia started a similar probe on coated steel exports from China, India, Japan and Korea.

Outlook

The third quarter may look subdued for Indian mills amid the ongoing anti-dumping investigations. Even though buyers from the EU may return for some pre-winter restocking, procurements from India look improbable, despite a few recent deals.

A source informed that current bookings will be delivered in end-December 2024 or early January 2025, "which opens up clients to the risk of the retroactive anti-dumping duty, in case it gets applied".

"Until we have the European Commission decision, these products (from India) will not be of interest to EU buyers," the source added.

That apart, the Chinese pressure will sustain, acting as a double whammy.