Japan: HRC exports drop in H1 CY'21 on a seasonal lull, rising prices

Japan's hot rolled coils (HRC) and plates exports dropped 7% to 6.47 mn t in Jan-Jun'21 (H1) compared to 6.96 mn t seen in the same six months of the previous calendar year. Exports of the material to most countries saw a drop in H1.

However, on a m-o-m basis, exports in Jun'21 rose 6.5% to 1.15 mn t against 1.08 mn t in Jun'20.

Exports to most countries drop: Exports of HRCs in H1 to China dropped 5.5%, to South Korea by 37%, to Vietnam by 33% and to India and the Philippines by 43% each. Exports to Bangladesh also dropped by 54%.

That apart, overseas sales to several countries, including Germany, which had cumulatively amounted to more than 75,000 tonnes in Jan-Jun'20, were nil or reduced to negligible levels in the same period this year.

However, exports to Thailand rose almost 78% to 1.08 mn t in the same period compared to 0.61 mn t seen in Jan-Jun'20.

Why have HRC exports dropped?

• HRCs are required mainly in the production of automobiles and plates in structural and construction applications. However, finished automobile production has seen a steady drop since Mar'21 in China due to production cutbacks and increased steel prices. Moreover, China entered the monsoon season when demand for plates drop due to halt in construction activities.
  
  
• Although China was the only country which had recovered in terms of economic activities about a year ago, its buying declined on higher prices.
  
  
• Automobile production/demand and construction in India was impacted by the second surge of Covid and monsoon respectively while Bangladesh started facing a rise in cases too.
  
  
• Japanese mills like Nippon Steel raised flat steel prices, passing on rising production costs to buyers. Thus, countries like Vietnam and others started preferring domestic HRCs because of price competitiveness.
  
  
• Russian exporters, following news of an export tax from August, became aggressive in the exports market, offering prices lower prices.
  
  

Flats exports in H1 flat

However, overall, Japan's finished flats exports were almost flat at 12.47 mn t in Jan-Jun'21 compared to 12.21 mn t in the same period in CY'20.

It may be noted that HRC and plates comprise the largest share in Japan's total flat steel exports.

Short-term outlook

With uncertainty over Chinese production cut norms and an impending export tax, there is a lull in activity out of China. Meanwhile, the Russian export tax has kicked in. Demand from Europe is also high. These factors may lift Japan's short-term flat steel exports.