Indian HRC mills push volumes overseas amid slack local demand

Thursday, 21 November 2013 17:57:10 (GMT+3)   |   Kolkata
       

Indian domestic hot rolled coil (HRC) prices have remained stable at around INR 39,500/mt ($628/mt) as most steel mills have been aggressively pushing volumes overseas to compensate for sagging local demand and to maximize margins from the weak rupee, local traders and officials at steel mills have said.

According to two Mumbai-based traders, local demand and volumes have slumped and, with no medium-term improvement foreseen by steel mills, the latter have been pushing their volumes overseas.

Market sources said that, with the rupee stabilizing at a lower level against the dollar, Indian steel mills have lowered HRC export offers by $10-15/mt since early November to the range of $520-530/mt FOB for late December shipments.

The Indian rupee has settled in the range of INR 61-63 to a dollar after depreciating by 12 percent over the last 12-months and steel mills have seized this opportunity to increase exports to both traditional and newer markets overseas, the traders said. This is evident from higher export targets for the current fiscal year fixed by steel producers like JSW Limited and Essar Steel. Essar Steel plans a 25 percent increase in overseas shipments this year compared to the 1.1 milion mt exported last year. JSW Steel has set the highest export target among Indian steel mills, planning to export 3 million mt in 2013-14, up from 1.9 million mt in the previous fiscal year.

“Local demand continues to be flat, and with Indian steel becoming competitive in production and technology, the export markets have been providing opportunities,” an official at JSW said.

While officials at steel companies have declined to disclose export offer prices saying that overseas shipments have been at prevailing international prices, several Mumbai-based traders told SteelOrbis that local mills have been offering discounts of five to seven percent on FOB offers to buyers of high volumes, particularly in the European Union and in the UK.

“The decline in the strength of the Indian currency from INR 55 to a dollar to INR 62-63 a dollar over the last 12-months has enabled local steel mills to offer higher than usual discounts on export offers and to gain competitiveness against HRC shipments from China and Taiwan,” traders said.

According to a marketing official at Steel Authority of India Limited (SAIL), unlike in traditional exports markets like Sri Lanka, the Middle East and the Far East, where shipments have predominantly been to trading houses, over 50 percent of shipments to markets in the EU and UK have been to actual users, with a greater volume of transactions being concluded.

$1=INR 62.92