China’s recent move to withdraw export rebates of 13% on 146 steel products, along with rising international steel prices is likely to benefit Indian steelmakers to export more in the coming quarters.
“Given the strong demand, export rebate cuts, the Chinese Government’s intent to keep steel capacities under check…China may not have excess steel volumes to divert to export markets. As a result, international steel prices are expected to remain buoyant in the near term, which in turn would support India’s steel prices,” said Jayanta Roy, Senior Vice-President & Group Head, Corporate Sector Ratings,
China’s steel exports have been on an uptrend in the current year and grew sharply by 24% YoY in Q1 CY2021, partly aided by a lower base and improving demand from other geographies.
On April 28, 2021, China announced the removal of export rebates on 126 steel products, including hot-rolled coils, and also cut the import duty on crude steel, pig iron and scrap to zero with effect from May 1, 2021. According to the report by ICRA, this action is likely to slow down the pace of Chinese steel exports in the near term and in turn benefit Indian steel mills.
China’s domestic HRC price is close to $900/MT in end-April 2021, its export HRC prices stood at $915/MT. Without the export rebates of 13%, there would not be any major incentive for Chinese steel mills to export in large quantities at these prices.
“While India’s export HRC prices as of May 1, 2021, were trading higher than Chinese export HRC prices at $950/MT, Indian steel exporters are earning better realisations in the export markets than close to $900/MT earned in the domestic markets,” said the report by ICRA.
In the current scenario of a moderation in demand in India due to the second wave of Covid-19 and consequent business lockdowns, Indian steel mills would be able to offload large steel volumes to export markets and still remain highly profitable in ICRA’s view.
“While long steel products would continue to dominate India’s consumption growth story going forward, a favourable international market environment for export of flat products amidst domestic demand slowdown augurs well for Indian steelmakers in the near term,” Roy said.
Source: Economic Times