Steel exports from India are on an upswing, more than 15% during the April-Nov period.
Amid slowdown in domestic demand, rising imports, this is good news as it would help higher capacity utilisation of steel production that has already come down from 89% to 83% in the past 3 years.
The EU and US markets being closed for flat products for Indian steel, there is a change of export destinations as per the official data, although the US imported other steel products, totalling 6,86,000 tonnes from India during the first ten months this year. Fledgling steel producers such as Saudi Arabia, UAE, Ethiopia and Kenya are consuming GP/GC/colour coated, Bars and Rods, CR Coils of Indian origin.
The exploration of neighbourhood markets has been the focus area of Indian steel producers but the attractiveness of the domestic market and the slowdown in markets abroad denied this opportunity and currently other major Asian producers such as China, Japan and South Korea have become the major players.
They have established long-term tie-ups with countries such as Bangladesh, Myanmar, Sri Lanka by virtue of rigid delivery schedule, competitive prices and customised product range.
Among the steel categories, the export of Bars and Rods have grown by around 149%, which implies that Wire Rods and TMT Bars are major components and other than major steel producers, many medium enterprises, also have become exporters of small lots. Among other categories, GP/GC/colour coated and CR Coils and to some extent, Tin Plate exports have grown significantly during the first 7 months of the current fiscal.
Plate exports have gone down compared to previous year and it indicates that globally heavy machinery, ship-building, boilers, pressure vessels segments are yet to recover.
The average spread between HR and CR is much lower in export realisation than what the European or Japanese exporters are realising. The average spread between CR and GP of around $200/t must encourage more thrusts on export of galvanised and colour-coated sheets and coils from India.
The export realisations are in tune with global trend. Domestic prices in India are still higher which has always been the case, except sometimes in case of GP/GC where there is substantial excess capacity in the domestic market.
But this is no exception. All the countries export at a price lower than domestic level as the global market which is shrinking has many low cost producers who are capable of offering prices on marginal cost basis.
And this may be the reason why of late there has been a surge of anti dumping and countervailing cases against the big exporters like China, EU, USA, Japan and South Korea. The strategy of Indian steel producers to find out export destinations where the demand base is not significant and operated primarily by the minor players are providing them a better outlet for increasing production and also to fetch a marginally higher realisation as the competitiveness in the domestic market is getting stronger.
Even with the increasing rate of exports, India is likely to end up being a net importer in the current fiscal. However, fresh capacity addition in the next year with demand growth lagging behind the production growth, may result India being a net exporter.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal