Ex-India hot dip galvanized (HDG) coil prices have remained unchanged, but under largely irrelevant circumstances as most exporters are reported to be withdrawing offers submitted last week due to the imposition of 15 percent export tax, SteelOrbis learned from trade and industry circles on Thursday, May 26.
The ex-India tradable price level was at $1,100-1,220/mt FOB with the midpoint at $1,160/mt FOB last week, with offers at the higher end of the range, but most such offers were under process of being pulled back since the additional burden of 15 percent tax could not be added to offers at a time when buyers, particularly in the EU region, are anticipating a deeper new bottom.
“Forget new offers. We do not even know what to do where sales contracts have been drawn up or tonnages are awaiting at ports for shipment. We are already looking at huge losses on existing contracts where there is no option but to cancel and bear penalties for delivery default,” an official at a private mill with a supply contract with a Bahrain-based buyer, said.
“Even the penalty burden is not such a big issue as reputational loss and credibility as a supplier in global markets. It will take years to recover lost ground in the international market, if and when the export tax is even withdrawn,” he said.
According to a steel sector analyst with a Mumbai-based financial services firm, Indian mills will have to seriously take a re-look at continuing production of HDG, as the auto industry consumes merely 30 percent of steel products and those too used only in export production of automobiles. Therefore, 70 percent of domestic HDG production would be rendered surplus and un-absorbable in the domestic market.
