Indian Steelmakers Turn Net Exporters To China In April-August: Crisil

Indian steelmakers have turned net exporters to China during April-August for the first time in several years, owing to weak domestic demand due to Covid-19 pandemic, according to Crisil Research.

With 69% of semi-finished steel and 28% of finished steel heading there between April and August, India turned net exporter of steel to China for the first time in several years, the rating agency said.

Primary steelmakers exported 60-80% of their total production between April and August this year to various destinations, with China leading the pack, it added.

Crude steel production fell a lower 27% on-year despite a massive 38% decline in domestic demand between April and August, the agency said.

The fall in production was far less severe for export-oriented primary manufacturers with around 20% decline, compared to 40% fall in the secondary steel segment.

"However, the jump in exports, by as much as 400% on-year in June, has come off peaks since then, owing to the easing of domestic lockdowns and some revival in economic activity, reclaiming domestic demand for steel," it said.

For China, supply disruptions and elevated global iron ore prices led to higher steel imports in these months, given that it imports over 90% of its iron ore requirement.

"While global steel prices were on a slide from end-February till June, iron ore prices soared, led by supply-side disruptions especially in Brazil and Australia. Iron ore prices zoomed past coking coal prices another first in the past 25 quarters. This prompted port-based capacities in China to import semis and process them further in order to save on increased iron ore costs," the agency said.

According to Crisil, more than two-thirds of Indian semi-finished exports were to China in April-August.

"Notwithstanding soaring iron ore prices, global steel prices fell to a low of USD 409 per tonne in April, the lowest since October 2016, given weak demand and limited export opportunities. But demand recovery in China, especially in the current quarter, aided a nine per cent on-month rise in steel prices in August to USD 502 per tonne," it said.

Crisil Research expects global steel prices to rise to close at USD 460-490 per tonne, or 3-5% lower on-year.

"While global steel prices will witness a 3-5% drop on-year in calendar 2020, domestic prices are expected to decline only 1-2%, also given that anti-dumping duties are in place," it noted.