Spike in Indian flat steel demand reduces mill reliance on exports

Major Indian steelmakers saw a sharp increase in domestic sales in August, allowing them to focus more attention on the home market rather than having to rely on exports.

Integrated steelmakers such as Jindal Steel & Power Ltd (JSPL) turned to exports during the first quarter of 2020, when weak domestic demand coincided with a growing need for steel in regions such as Europe and China.

But over the past month, stronger domestic consumption of flat steel in India and limited hot rolled coil (HRC) supplies, following the reduction in steel output due to Covid-19 restrictions, has led mills to sharply increase their flat steel offer prices for September sales.

Fastmarkets’ weekly price assessment for steel hot-rolled coil domestic, exw India was Rs38,500-39,000 per tonne on August 28, up from Rs35,000-35,500 per tonne one month before. 

JSPL’s sales rose by 38.0% year on year to 836,000 tonnes in August compared with 606,000 tonnes in August 2019, the company said on Thursday September 3.

Exports contributed 42% to the company’s overall sales volumes last month, down from 57.7% in the second quarter of 2020.

Steel export volumes have come down significantly with an increase in domestic sales following the lockdown period, JSPL managing director VR Sharma said.

The picture was similar for the sate-owned Steel Authority of India (Sail), which sold an overall 1.43 million tonnes of steel in August, up 35.3% from 1.06 million tonnes the same month in 2019, according to a report in Indian newspaper The Hindu.

And while Sail’s exports in August amounted to 109,400 tonnes and accounted for just 13.5% of total sales, this was a 250% year-on-year increase compared with August 2019, which clearly demonstrates the dramatic shift toward export sales that has taken place in India during the Covid-19 outbreak.

One key reason for the rise in domestic demand has been stronger Indian automotive demand during July and August, a major South Asian scrap exporter told Fastmarkets.

Indian passenger vehicle sales were 336,513 units in the April-July period to, down by 62.7% year on year, according to the Society of Indian Automobile Manufacturers (SIAM). But in July itself, passenger car sales volumes showed some green shoots of recovery and only fell 3.9% year on year at 182,779 units.

Similarly, overall vehicle production dropped 66.3% in April-July, but fell by only 29.4% year on year in July, according to SIAM.

Reduced volumes for export
While India remains an active participant in exporting flat and semi-finished steel, there has been a noticeable decrease in the availability of material offered for export from the country over the last month, market participants told Fastmarkets.

“Sail is out of the market, and [JSPL] is not exporting billet. Mills are focused on the domestic market and there is not much available for export right now,” a Singaporean steel trader said.

“The Indian domestic market is very strong right now,” a second trader in Singapore added.

Fastmarkets heard of a Sail billet tender on August 27 where Chinese traders bid at $435 per tonne cfr China, but Sail then announced it would suspend the tender in the belief that it could achieve a better price by holding back from exporting.

Although few new export offers have surfaced in the market recently, slab ordered in previous deals from Sail has arrived at Chinese ports over the past two weeks, according to a Chinese trader.

The reduction in steel supplies from India is limiting the options for billet buyers in Southeast Asia, with few offers heard into the Philippines over the past week.

Offers that were heard came in at $445 per tonne cfr Southeast Asia,  at $450 per tonne cfr from Vietnam and at $445 per tonne cfr from Russia’s Far East ports.

Fastmarkets’ daily price assessment for steel billet, import, cfr Southeast Asia, which mainly looks at 120-150mm 5sp grade billet sold into the Philippines, was $445 per tonne on September 3, unchanged day on day but up from $435-440 per tonne cfr week on week.

Miranda Song in Shanghai contributed to this story.