Indian steelmakers turn net exporters to China in Apr-Aug: Crisil

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.

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 the COVID-19 pandemic, according to Crisil Research. With 69 percent of semi-finished steel and 28 percent 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 percent 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 percent on-year despite a massive 38 percent 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 percent decline, compared to a 40 percent fall in the secondary steel segment.

"However, the jump in exports, by as much as 400 percent 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 steel demand," 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 percent 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 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 percent 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 percent lower on-year.

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