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Indian steel exports are suffering and will likely face further hurdles as China's overcapacity and weak domestic demand push the world's second-largest economy to flood the global market with ultra-cheap steel. Approximately 25% less than the previous month's (m-o-m) of 0.66 MT in April, India's steel exports in May 2024 totalled 0.5 million tonnes (MT), according to preliminary statistics provided by market research and consulting company BigMint.
"The steel export market is currently distorted and lacks attractiveness due to China's continued strategy of flooding the global market with low-priced steel. Low domestic demand in China is leading to substantial exports at prices below the cost of production," Ranjan Dhar, director and vice-president of sales & marketing, ArcelorMittal Nippon Steel India (AM/NS India), told Mint.
The price of hot-rolled coil exported from China has dropped to $520/tonne from $525/tonne in just one week, according to a BigMint report. This has put further pressure on the price of steel globally. By contrast, Indian export prices were higher than China's, ranging between $650 and $660 per tonne. China's crude steel production rose 8.1% m-o-m to 92.86 MT in May from 85.94 MT in April. China's crude steel production in May last year stood at 90.4 MT.
According to a recent Crisil report, China exported around 94 MT of iron and steel products globally in the calendar year 2023, a 38% increase over 2022. This also means an uptick in exports from China to India. According to a steel ministry report, the value of Chinese steel exports to India rose from $391.67 million in March to $434.01 million in April this year. According to provisional government data, India's finished steel imports stood at 8.3mt in FY24, up 38%. China, South Korea, Japan, and Vietnam were the major contributors, according to Crisil's report on the sector.
Weak global demand and falling input costs have weighed on steel prices. Coking coal prices fell 7% week-on-week to $239 per tonne FOB (free on board) on 21 June. This has prompted Indian steel mills to focus on domestic demand, as exports remain a margin-dampening prospect. While competitive prices in West Asia and Southeast Asia remain a concern, the situation in Europe is deteriorating due to weak demand and a rigorous regulatory environment.
"Major competition for Indian steel exports is evident in the Middle Eastern and Southeast Asian markets. China continues to flood the market with cheap exports, putting pressure on Indian mills. With European demand also remaining weak, Indian producers are increasingly focusing on the domestic demand," said Dhruv Goel, chief executive officer of BigMint.
However, the domestic demand environment could be more substantial as monsoon rains and budget-related uncertainties weigh on prices. India exported steel worth ₹98,117 crore in FY24, down from ₹1.07 trillion in FY23.
"India stands out as a bright spot in the global steel market. Although domestic demand is sluggish, it is expected to rise with a renewed focus on capital expenditure by both the government and the private sector," added Dhar. "However, India must remain vigilant in its growth efforts, as cheap Chinese imports pose a serious threat."
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