India's Flat Steel Exports Drop Further In October 2023

The Indian Steel industry is facing significant challenges as the country’s exports of Flat Steel (HRC/Plate), have seen a continuous decline throughout the year.

The decline is primarily due to a focus on domestic trades, where the producers are achieving better margins, given the unfavourable global trends and falling Steel prices.

In October 2023, India’s Flat Steel exports hit their lowest levels of the year, marking the third consecutive month of decline and raising concerns within the industry.

Concerning Trend

The data reveals that in October 2023, India exported approximately 54,000 tons of Flat Steel (HRC/Plate), a substantial drop of 58% compared to the 1.3 lakh tons exported in September 2023. This consistent downward trend is alarming for the Indian Steel industry as inventories with the mills were gradually rise amidst a slowdown in domestic sales as well.

Year-to-Date Export Performance

When analyzing the overall export performance from January to October 2023, a year-on-year decline of 15.9% becomes evident. During this period, India exported 25.9 lakh tons of Flat Steel (HRC/Plate), down from 30.8 lakh tons in the same timeframe in 2022.

This data underlines the challenges faced by Indian Steel producers in the international market, primarily due to competitive Chinese offers that have piqued the interest of countries where India previously supplied Steel, such as South Asia, the Middle East, and European nations. This shift in strategy arises from the following reasons:

• Fewer Export Realizations: One of the main reasons for this decline is the shift in focus toward the domestic market. Indian steel mills are increasingly choosing not to export Flats especially Hot Rolled Coil (HRC) to Southeast Asian and Middle Eastern markets.

• Higher Realizations In Domestic Market: Indian mills have opted to keep their HRC export offers on hold for Southeast Asia and the Middle East due to better realizations in the domestic market. Although Chinese prices have improved, they remain competitive and have deterred Indian mills from exporting. In addition, mills are more focused on the domestic market, reallocating their resources accordingly.

Given these challenges, Indian steel mills have found that focusing on the domestic market offers better opportunities, as international ventures seem unviable due to unfavourable economic conditions and subdued global demand.

• Price Disparity: Another significant factor discouraging Indian Steel exports is the price disparity between the international and domestic markets. While HRC prices in the international market have seen a slight increase, they still lag behind the price realization in the Indian domestic market, further disincentivizing exports.

Key Export Destinations

During the first ten months of 2023 (January to October), these were the key India’s Flat Steel export destinations:

• Italy: It remained the top buyer, accounting for 31% of total exports with 8 lakh tons.

• Nepal: Followed with 3.5 lakh tons (13%).

• Vietnam: It exported 2.7 lakh tons (11%).

• UAE: It exported 2.5 lakh tons (10%).

In October 2023, the largest buyers of Indian Flat Steel were Nepal at 30,000 tons, followed by the UAE with 4,300 tons, and Italy with around 2,000 tons.

Market Outlook

Considering the current circumstances where domestic sales are the preferred choice for Indian suppliers due to lower realizations in global sales, it is likely that Flat Steel exports will continue to face pressure.

Moreover, since the largest buyer in October, Nepal has started procuring materials from China due to cost competitiveness, India’s Flat Steel exports may experience a significant decline in the coming months unless there is a substantial recovery in the Chinese market. The Indian Steel industry must adapt to these challenges to maintain its global competitiveness and seek opportunities for growth in a changing international market.

OFB’s Insight

In October 2023, India’s Flat Steel exports hit a new low, marking the third consecutive month of decline. Year-to-date data shows a 15.9% decline in exports, driven by domestic market focus, price disparities, and competitive Chinese offers. The outlook for Indian Flat Steel exports remains challenging.