Despite a number of challenges like increasing inflation and sagging industrial demand impacted by some negative economic indicators, the Indian steel sector has been in better shape compared to other major Asian countries, with both production and consumption of steel being on a rising path. It has also led to a significant increase in steel imports to India in 2022, helping a number of exporting mills from Russia, Vietnam, Japan and South Korea to survive amid conditions of a demand slowdown. Though the outlook for India in 2023 is relatively promising, market sources have different views of the prospects for India’s steel imports and exports.
In the January-November period, steel usage in India increased by 12 percent to 75.3 million mt, reflecting strong development in construction steel demand in particular. The better demand resulted in India importing 3.8 million mt of carbon steel in the April-November period, up 22.5 percent from a year earlier, according to the official data. Though overall import steel volumes to India were not large, demand from India, which was still on the rise in 2022, was among the very limited drivers supporting the global steel market. The major sellers of HRC to the country became - apart from the more or less regular suppliers Japan and South Korea - Vietnam and Russia, with the letter managing to become the leading supplier within a few months. “Given the limited growth opportunities in leading global steel producing hubs of China, Japan, South Korea, the CIS, Europe and the US, finished steel exports to India were steadily increasing, resulting in India becoming a net finished steel importer during October-November 2022,” rating agency ICRA said in a report.
Indian steel consumption in the calendar year 2022 is expected to grow by eight percent compared to the previous year, ICRA said, which is close to the 7-8 percent growth forecast for the fiscal year 2022-23. Given the expectations of a slowdown in the pace of economic activities over the next few quarters, domestic steel consumption growth in India is likely to moderate to 6-7 percent in the fiscal year 2023-24, ICRA noted.
Though the projection for the next fiscal year is still rather positive, competition has also been tough. “Fresh steel capacities amounting to 21-22 million mt per annum are lined up for commissioning in FY 2023/FY 2024. As fresh supplies are likely to outrun incremental demand, the industry’s capacity utilization level is expected to moderate to 78 percent in FY 2024 from 80 percent in FY 2022,” ICRA said. As a result, major exporters of steel to India will have to maintain a policy of low prices if they want at least to keep their market share. In general, a slowdown is expected, taking into account cost pressure, high freight to India, and the gradual improvement of demand in other markets, more traditional for suppliers. “Today, we have a very competitive product [due to low production costs] but, while being absent in the European market and forced to sell to Southeast Asia and nearby countries, our logistic costs are 20 to 40 percent of the price for finished steel,” Severstal’s general manager said. Being able to increase shipments to the Middle East and its local or neighboring markets, Russia may limit its presence in the Indian market to sporadic sales next year, according to market sources. The export potential of Vietnam is fully dependent on the situation regarding domestic consumption, which is expected to be better from the second half of 2022, and until then some volumes may still be available from Vietnam.
At the same time, steel export volumes from India will grow steadily next year, though “it is unlikely to go back to levels seen in FY 2021-2022 even in FY 2023-24 as the external demand environment remains challenging,” according to ICRA. Finished steel exports from India fell by 55 percent in the April-November period of 2022 to 4.3 million mt as the government imposed a 15 percent export tax and overall global demand recorded a sharp drop. According to a few market sources, flat steel export volumes from India are likely to improve to 400,000-500,000 mt per month in the next two quarters, from below 100,000 mt in November 2022. “We have already seen the normalizing of sales [for February shipment]. I am not sure that volumes will be the same as a year ago, but the shipments are definitely going back to normal,” an Indian source said commenting on the situation in the HRC segment.