Steel mills slow down orders to Europe as they exhaust export quotas

Indian steel mills have been witnessing a slow down in exports to Europe – one of the key markets it tapped in January to March period of this year – on account of a fall in prices and having exhausted their quota.

Trade sources told BusinessLine that the mills have also exhausted their quota, for exports, in the April to June period, for downstream products – cold rolled coils, galvanised, colour coated; while in categories like hot rolled oils (HRCs) and rebars, it is nearing exhaustion. During the period, the quotas were revised for India to around 273,200 tonne (up around 39 per cent over January-March 2022) for HRCs, while those of cold rolled coils stand at around 86,600 tonne (1 per cent up).

For Q1 CY22, the quota allocation for HRCs stood around 166,000 tonnes, cold rolled coils around 147,656 tonne and quarto plates at 49,127 tonne.

Opportunity ahead?

Steelmint data show that in contrast to India, other countries have been unable to meet their quota volumes for the quarter, which will be converted into residual quotas for the succeeding Q2. Similarly, for long products, most countries could not meet their quotas amid the escalation of geopolitical tensions and the subsequent hindrances in logistics.

“Steel majors in India turned active in export bookings to EU markets by mid-January 2022, after which the frequency increased in mid-February and continued till mid-March,” VR Sharma, Managing Director, Jindal Steel and Power Ltd (JSPL), said. Talks are on to increase the quota, and a likely announcement is expected by May-end.

According to trade sources, the European Commission (EC) has put forth its intent on restricting trade ties with Russia and restraining on other benefits amid its invasion on Ukraine. The EC banned imports of key goods in the iron and steel sector from the Russia, thus, benefitting Indian players as they could come in to fill in the gap.

“Right now, Indian mills have exhausted their export quota and are awaiting the announcement for new quotas by the end of this month,” he added.

Prices down

Meanwhile, steel prices are down in Europe by at least $100 per tonne. As a result, the Middle East region (including Turkey) – which buys from Indian mills before value addition and sending them to export – have gone slow on orders. They are anticipating a further decline in prices which is why they are holding back, official at an Indian steel major said.

Price of Europe HRC — CFR Antwerp — was around $1,000 per tonne in May versus $1,140 per tonne for April (down 12 per cent). Similarly, on May 10, EU steel export price was at $1,124 per tonne (CFR Antwerp), as against $1,274 per tonne on April 8.

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