Indian steel mills show mettle, reduce dependence on China for exports

Most companies resorted to exports during April and May to tide over the nationwide lockdown which impacted end-users of steel

Steel manufacturers are reducing dependence on China for exports, with the gradual opening up of business across the world. 

Even though the country still accounts for the lion’s share of semi-finished steel exports from India, China has come off from the highs during the lockdown. According to data from the Joint Plant Committee (JPC), India exported 1 million tonnes of semi-finished steel to China during April and May, while total semi-finished steel exports stood at 1.3 million tonnes. 

In June and July, however, China’s share stood at 45.7 per cent and 55.47 per cent, respectively. China's share of semi-finished steel exports peaked at 84 per cent in May. In finished steel, too, China’s share dropped from around 30 per cent during April-June, to 24 per cent in July.

V R Sharma, MD of Jindal Steel & Power, said China accounted for 30 per cent of the firm’s exports in August, which would be zero for September. “This is purely on commercial grounds. There is a price difference of 4-5 per cent between China and other countries,” he explained.

Imports from China are generally a cause for concern, but the situation reversed during the lockdown as firms rushed to plug the demand gap there, once it started opening up.

Another major primary steel producer confirmed that China’s share in exports was coming down. “West Asia, Taiwan, and even Europe emerged important destinations for finished steel,” said the producer.

For semi-finished steel, Indonesia, Nepal, Thailand, and The Philippines were destinations for export of semi-finished steel during June and July, though volumes were much lower compared to those sent to China. A look at data for the last four months, however, shows that exports were getting distributed across countries.

“Landed price of steel imported from China, after factoring in 1.5-2.0 months of lead time, is almost the same as the current domestic price. Interestingly, domestic and export prices of Indian hot rolled coil (HRC) are hovering at similar levels,” said Jayanta Roy, senior vice-president of ICRA. Steelmakers increased prices by Rs 3,000 a tonne over July and August, driven by the increase in global prices, pick-up in domestic demand, and cost push from key raw materials such as iron ore.

If export and domestic prices are at the same level, firms may prefer to sell locally, provided demand picks up. “Domestic steel demand rose over 10 per cent month-on-month, which indicates gradual recovery in demand following relaxation of the lockdown. However, a return to pre-Covid levels in demand will take time, as steel consumption in July 2020 was still 29.06 per cent lower than July 2019,” said Roy.

Steelmakers expect exports to reduce, with an improvement in domestic demand. The lockdown had pushed steel exports to record levels, with semi-finished steel in the first four months of FY21 crossing the overall volumes of semi-finished steel exports in FY20.

Finished steel exports during April-July were more than 50 per cent of total volumes of finished steel exports last year.

Most firms resorted to exports during April and May, to tide over the lockdown that hit end-users of steel. However, there was a decline in exports month-on-month. In June, finished steel exports stood at 1.5 million tonnes while semi-finished steel was at 991,000 tonnes. But in July, the corresponding figures were 1.38 million tonnes and 941,000 tonnes.

Jayant Acharya, director (commercial and marketing), JSW Steel, said that exports were not likely to continue at the same level as in the last few months. As domestic demand improves, exports will continue in a calibrated manner.