Following the announcement by China’s Ministry of Finance of the withdrawal of the export rebate applied on several products, market players have been keeping an eye on the possible effects of the decision. As for the Indian market, the most widespread idea is that China’s move can be an opportunity for Indian exporters to increase their prices and also their sales.
According to market insiders that shared thoughts with SteelOrbis, the withdrawal of the 13 percent export rebate will lead to a lower flow of HRC into the international markets and will tighten supplies across the Asian and Gulf markets. On the price front, sources estimate that the ex-China HRC price is expected to see an increase of at least two to three percent, with the exclusion of the benefit of the export rebate, he said.
China’s withdrawal of the export rebates of 13 percent for 146 steel products and its scrapping of the import duty on semi-finished products, pig iron and scrap augurs well for Indian steel companies. The withdrawal of incentives by China will push up steel prices globally and provide enough room for Indian steel companies to raise prices even as the fall in demand remains a concern.
The new trend is already emerging in the Indian market as evidenced by local steel mills aggressively increasing HRC prices twice during May, leveraging the high prices in China and the concomitant rise in the landed price of imports, offering Indian producers headroom to increase their own list prices.
As of May 1, India’s HRC export price was higher at $950/mt compared to China. Domestic realizations of Indian steel companies were lower at $900/mt. Accordingly, Indian steel mills would be able to offload large steel volumes to the export markets and still remain highly profitable.
China’s current export offers for HRC SS 400 stand at $939/mt FOB ex-Tianjin. This is nearly a $34/mt rise compared to a week ago and it may be due to the export rebate withdrawal for HRC. As China is a prime source of steel materials specifically in South Asia, South East Asia and other neighboring areas, the higher offers resulting from the rebate withdrawal from China will push up global prices of flat products further.
This would in turn result in more export realizations for Indian exports of HRC, CRC and coated products. There is likely to be a rise in the range of $25-30/mt in export offers of HRC from India for June shipments. India’s exports to West Asia are likely to fetch a comparatively higher realization and a corresponding rise in export offers of CRC.
