India’s steel production contracted since the arrival of COVID-19. However, exports surprisingly notched a new high in the April-July 2020 period.
Steels exports more than doubled in these months to hit their highest level in six years, reported news agency Reuters.
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Chinese demand soaks up India’s exports
Much of the Indian steel exports headed to China, despite ongoing tensions between the two nations.
China’s emergence as a new leading buyer of Indian steel has caught producers and analysts unaware. China replaces traditional importers like Vietnam, Italy and Belgium.
According to a China Iron and Steel Association official, it was paying particular attention to the imports of hot-rolled coils. The latter is used mostly to make pipes, automobile parts, and engineering and military equipment.
Indian production set to continue contraction
On the production side, a new report by Fitch Ratings has predicted further contraction in fiscal year 2021.
The ratings agency said higher prices supported by the price rebound in China will drive margins in the second quarter of the fiscal year and beyond. Hot-rolled steel sheet prices in China have improved by around $100 per metric ton since April 2020. Indian prices had started to tick up since late July, with a lag.
But the silver lining, according to Fitch, is that steel volumes could further improve over the next few quarters. Rural consumption and government spending on infrastructure would lead the improvement, and lead to better margins due to operating leverage.
On the exports front, Indian steel companies, like Tata Steel Ltd and JSW Steel Ltd, sold a total of 4.64 million tons of finished and semi-finished steel products in the world market between April and July. That total compares to 1.93 million tons shipped in the same period a year earlier.
Of the 4.64 million tons, Vietnam and China purchased 1.37 million tons and 1.3 million tons of steel, respectively.
Steel analysts here feel the exports jumped because of reduced prices as Indian sellers tried to get rid of a surplus generated by the impact of COVID-19 on domestic demand.
Analysts are also optimistic that with the Unlock 4.0 plan now announced, activities such as construction would increase. As a result, the plan would lead to an increase in local consumption, too. Overall, in the short term, exports would continue to grow over domestic consumption in India.
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