Indian steel exports in July are expected to decline compared to May when mills were actively perusing seaborne trades. The drop in exports is estimated to be driven by slowing demand from China and Southeast Asian countries, the main overseas markets. Trade with China remained hit not only due to the border tensions but also as demand in the Chinese steel market falling amid heavy rainfall. In the period, however, Indian capacity utilisation increased. 

As per government data, in Q1 FY’21 or April-June’2020, Indian steel exports jumped by 145.3pc to 3.27mn mt from the prior year and imports fell by 33pc to 1.21mn mt, making India a net exporter of finished steel. 

 

In the domestic market, production of crude steel was at 15.87mn mt, a decline of 43.1pc, while consumption of total finished steel was 10.69mn mt, a decrease of 56.8pc from the same period in the prior year. 

 

Exports 

Finished steel and billets exports from India witnessed a sharp jump in volumes for successively two months in May and June. Steel inventories with steel makers had lowered significantly giving prices a lift. With the diminishing demand, since late June, steel inventories have started to build up again amid still subdued domestic construction and manufacturing demand.  

 

Additionally, steel exports are expected to dampen for next few months due to high operating costs and competitive offers from other suppliers in Russia, CIS and East Asia. Along with a drop in domestic steel production, the growth of steel sector could remain slower though the second half of the year as well. 

 

Recovery in many international markets, particularly in Asia is likely to be delayed by an overall seasonal slowdown. Liquidity crunch also forced many mills to export at a lower price despite high input costs and poor profit margins.  

 

Davis Source informs that optimism on steel exports to Europe declined with the EC modifying steel safeguard measures for country-specific quarterly quotas as many of the countries. 

 

Domestic steel 

A sharp drop in domestic steel production in Q1 FY21 could impact operations due to huge fixed costs and squeezed margins. Additionally, monsoons could keep domestic consumption lower. This, despite some recovery in the rural economy. 

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