Indian steel mills have commenced withdrawing hot rolled coil (HRC) export offers submitted prior to the government’s imposition of 15 percent export tax effective, May 23, 2022, with some reports indicating sellers have been commencing negotiations of penalty clauses where contracts have been drawn up but cannot be executed, SteelOrbis learned from several industry sources on Thursday, May 26.
According to sources, while there are definite volumes for which offers have been withdrawn as exporters are unwilling to divulge “sensitive details”, industry ballpark estimates are that 100,000-150,000 mt of aggregate offers have been cancelled since the imposition of the export tax.
“We are already completely in the dark as to the fate of export contracts already executed but not delivered. We have no clue where letters of credit have been executed by buyers. Under these circumstances, there is no alternative but to withdraw offers submitted last week to buyers in the EU and Gulf,” an official at a private sector integrated mill said.
Another official with an eastern region-based mill said that it had already received an irrevocable letter of credit from an EU-based trading company for July shipment of HRC and there is no scope to change either the price or terms of delivery. The only option is to negotiate with the buyer in ‘good faith’ on penalties.
“Why should any buyer agree to a higher price from the impact from the levy of export tax at a time when buyers across EU are preferring to hold back new deals on expectations that a new bottom is yet to be reached,” he said.