Rashtriya Ispat Nigam (RINL) said it exported over 90,000 tonnes of steel to China in May. “It is understood that the Chinese are currently not using the steel melt facilities, but only operating the mills to cater to their construction sector and infrastructure requirements,” said RINL.
All major private sector producers, too, exported to China. Jayant Acharya, director (commercial and marketing), JSW Steel, said: “China is buying semi-finished steel and hot-rolled coils that they will further convert to downstream products.”
V R Sharma, MD of Jindal Steel & Power, also said China had emerged as a good market for semi-finished products. Tata Steel is also understood to be exporting to China.
Industry officials said though India used to export to China years ago, the latter has only, at present, emerged as a new market for Indian steel, especially semis. India mostly imports from China, with total steel imports from the nation at 1.21 million tonnes (mt) during FY20; exports were nil. That, however, did not include semis.
The key reason of the demand gap in China is the country’s pace of return to normalcy.
According to the World Steel Association (WSA), reduction in global steel demand
this year will be mitigated by an expected faster recovery in China, compared to the rest of the world. The association expects Chinese steel demand
to increase by 1 per cent in 2020. In contrast, steel demand
in developed economies is expected to decline by 17 per cent.
Acharya expects sustenance in exports to China, as it pushes up domestic capital expenditure to spur demand.
RINL, too, said that for the next few months, China will have the lion’s share of exported semis.
However, Jayanta Roy, senior vice-president at ICRA, expressed concerns over exports of semis. “According to data, India exported close to 0.3 mt of semis in April, which was over 40 per cent of the country’s total steel exports for the month — significantly higher than the levels in the previous two years. While exports provided some relief to steelmakers in the near-absence of domestic demand, export of low-value added steel doesn’t augur well for the country’s steel sector
in the medium-to-long term,” he said.
Steel firms have been resorting to exports to tide over weak domestic demand, with industrial activity yet to restart in India.
Acharya said exports were driving business. “For us, export dependency will be high for the next few months.”
He added that demand from South-East Asia was healthy. “Supply gaps from Japan and South Korea, caused by the shutdown, has created a demand gap. There has been gradual improvement in demand from West Asia,” said Acharya.
Most firms have ramped up production since April; a major driver has been exports. Till demand in the domestic market normalises, the trend will continue.
Acharya expects demand to be at 80 per cent-levels by October-December, and return to pre-Covid levels by January-March. “Normalisation of demand in the domestic market will be sector-specific. Construction, accounting for 60 per cent of steel usage, will improve first on the assumption of government pushing the infrastructure pipeline,” explained Acharya.