3d rendering of rolls of steel sheets in a factory
3d rendering of rolls of steel sheets in a factory | Photo Credit: PhonlamaiPhoto

There has been a 152 per cent jump in iron and steel exports, in value terms, in April-January 2021-22, over the same 10-month period in 2013-14, Commerce Minister, Piyush Goyal said, as he hailed the country’s emergence as a key player in the global steel market.

In a tweet, the Minister said iron and steel exports for the April to January 2021-22 period stood at $19,245 million, against $7,638 million in the April–January 2013-14 period.

India is the world’s second largest producer of steel.

“The immediate focus is to achieve exports to the tune of $400-500 billion,” V.R. Sharma, MD, Jindal Steel & Power Ltd (JSPL) told BusinessLine.

India’s finished steel exports (globally) were at 10.78 million tonnes in 2020-21, against 8.3 million tonnes in 2019-20. In the last fiscal year, total production stood at 96.2 million tonnes, while consumption was at 94.89 million tonnes.

According to data available on the Ministry of Steel website, 11.142 million tonnes of finished steel was exported in the 10-month period of FY22; an increase of 26 per cent YoY (over 8.84 million tonnes in April-January of FY21).

“Trends suggest India should be able to close FY22 at around 15 million tonnes of export and there is also increased demand in the European markets, as supplies from Russia have practically stopped,” an industry insider said, adding that the quartet of JSW–JSPL–Tata Steel–Arcelor Mittal account for close to 80 per cent of exports currently.

Nearly 81 per cent of India’s steed production for the 10-month period of FY22 came from private players (the four largest players leading the way); while 19 per cent was from state-run steel players. Production stood at 93.27 million tonnes; while consumption was 86.83 million tonnes for the 10MFY22.

Export opportunities

The markets expect the Russian invasion of Ukraine and subsequent sanctions on the former to benefit Indian exports through opening up of new markets, primarily Europe. The global steel trade stood at 237 million in CY20, of which Russia exported 29 million tonnes 9 million tonnes of which went to Europe.

“Post-sanctions on Russia, we expect a steel shortage in Europe, that should result in price escalation until alternative sourcing is arranged. This will take time given the quota system on steel imports in Europe,” said Motilal Oswal in a recent report.

Arcelor Mittal has already announced a EUR 180/tonne hike in steel prices after sanctions on Russia. And brokerage firm Motilal Oswal expects, Tata Steel to be among the biggest beneficiaries of any steel price hike in the EU.

“We also expect demand for semi-finished steel to improve sharply in the near term, which will push export prices for both billets and slabs, and ultimately impact domestic steel prices in a positive way,” the brokerage firm said.

Indian Mills Stepping In

Interestingly, Indian steel mills are stepping in to fill the supply gap.

“There is a shortage of steel in Europe and the Middle East and Africa region, and that supply will be bridged partly by India and partly by China,” JSPL’s Sharma said, adding: “We have seen good orders from these places in the last week or so, with some buyers asking for immediate delivery for shipments in March and April.” Nearly 35 per cent of JSPL’s total production is targeted towards the export market.

Some of the Indian steel makers executed orders to Europe at $1,200-$1,300 per tonne for plates and hot-rolled coil products; while long product prices (per tonne) were around $1,000-$1,100, say sources.

“Spot prices in Europe are up 20-30 per cent over the last few days; with hot rolled coils being priced at around $1400-$1450 per tonne, over $300 per tonne higher than Indian prices. Naturally it is more attractive,” Sharma explained.

Scale Up challenges

According to ratings agency ICRA, while new export markets will open up, Indian steelmakers could experience input cost pressures in the near term as Russia remains a key supplier of “many steelmaking materials” like iron ore pellets.

Indian mills reportedly are already operating at 80 per cent capacity and larger players have announced large capacity expansions to the tune of 40 million tonnes per annum, which is expected to be commissioned by FY26. The expansion plans have come up after a gap of 8 years and post a consolidation in the industry.

The cumulative capex – driven by the larger players – is expected to run into Rs 600,000 crore by 2027, say industry insiders. Most of the larger players are also open to brownfield expansion (acquisitions) apart from greenfield ones.