Indian integrated steel mills have managed to increase hot rolled coil (HRC) export prices, but deals have been limited due to a spike in local sales prices and the reduced focus on shipping volumes overseas, SteelOrbis learned on Monday, September 7.
With discounting coming to a halt, exporting steel mills have been able to conclude deals at $505-515/mt FOB, which is higher than discounted deals concluded a week ago at $500/mt FOB on average. Offers have still been coming at $515-520/mt FOB.
However, with most integrated steel mills increasing base prices over the past five working days and strong local sales ensuring higher per ton realizations from local deliveries, producers have been progressively lowering their export reliance, traders and officials at steel mills said.
Two officials at private steel companies said that during August total exports as a proportion of total sales of producers had fallen to levels of 47 percent from 58 percent during the April-June quarter and, with local steel mill pushing more HRC volumes in the local market, the proportion of exports to total sales is expected to continue its downtrend to 25-30 percent by the end of September.
Operating margins of domestic steel mills improved by five percent during the July-August period compared to the first quarter of the current fiscal year, riding on the average drop of $30/mt in price of coking coal and the increase in local prices, and steel mills are therefore less compelled to aggressively ship overseas to maintain operational viability in contrast to the situation in the first quarter, according to an analysis by rating and financial services firm, Icra.
A few bookings for 10,000-20,000 mt each have been reportedly done at $530-535/mt CFR to Vietnam in the second half of the past week, which corresponds to $505-510/mt FOB or slightly above. Also, some small sale of 5,000 mt has been reported to an Asian trading firm at above $510/mt FOB.
A western India-based steel mill has reported a trade for around 8,000 mt with a Nigerian end-user for November shipment at around $520/mt FOB, sources said, which is above the overall market level so far.
In the European market, negotiations by one Indian mill have been heard at $545/mt CFR or around $510-515/mt, but there has been no confirmation of the deal actually being done by the time of publication.
An official at a steel mill pointed out that, apart from rising domestic demand and prices, the capping of incentives available to all merchandise exporters under the Merchandize Export from India Scheme (MIES) during the September-December period provided by the government and the eventual scrapping of the scheme from January 01, 2021, will prompt steel exporters to further ease their focus on overseas shipments.
He said that, with the loss of incentives under the MIES, exporters would need to increase prices by about two percent, but domestic steel mills do not have headroom to increase export offers further without facing buyers’ resistance at current demand levels and hence they would increase volume offerings in local markets, which in any case has been offering at least 10-12 percent higher per tonnage realizations in rupee terms.