Ex-India hot rolled coil (HRC) prices are reported at lower levels but such prices have been rendered irrelevant as domestic steel mills focus on solving problems with already signed contracts, facing risks of at least $300 million from possible order cancellations, following the imposition of 15 percent export tax and mills no longer receiving any bids being outpriced in most overseas markets, SteelOrbis has learned from trade and industry circles.
Sources said that the ‘notional’ ex-India HRC price is at $790-830/mt FOB, against $790-850/mt FOB a week ago, but no deals or even negotiations have been reported as “all export pricing economics had been thrown haywire following the imposition of the export tax with immediate effect,” a source said.
According to market sources, at least 2 million mt of steel exports of which HRC comprised 60 percent have been jeopardized by the levy of the export tax. Sellers are not in a position to rework contract prices, as factoring in the tax as such would not be acceptable to any buyer and mills are seeking cancellation of contracts, at least those signed over the past few weeks, when prices have already dropped sharply from the previous highs.
Exporters have no clarity on whether cargoes at ports with letters for export orders will be exempt from the export tax and mills are seeking clarifications from the government. However, at least one official at a private steel mill said that customs officials at ports are claiming that since the levy had come into effect on the night of May 22, all shipments irrespective of the stage of loading will attract the tax.
The official said that this would have a completely negative impact on the credibility of the seller in international markets as nowhere in the world can sales contracts be re-negotiated at the delivery stage.
A lot of trading sources believe that Indian mills will have to fulfil their obligations and will cover the tax losses “at least to Europe where prices are high it is possible,” one source said.
