India’s steel imports is expected to remain elevated around the 6 million tonne (MT) mark this fiscal even as the global steel industry battles a slowdown, said a report by CRISIL MI&A. Strong domestic demand, supported by government spending on infrastructure, building and construction segments, it added, will support this growth.
Global steel demand, which has been subdued since the onset of the Russia-Ukraine conflict, is expected to grow 1.6 per cent in 2023, after a sharp decline of 3.3 per cent in 2022. However, the scenario remains suboptimal across key economies.
Meanwhile, demand in China, which is the world’s largest producer of the commodity, has started reviving after a three-year slump. However, oversupply has led to subdued prices. Over the past few months, Chinese mills have been facing margin pressure, mainly due to high raw-material prices and a depreciating yuan. Although the Chinese government is trying to keep demand afloat with infrastructure spending and relaxing policies on property ownership, real estate continues to be in a recessionary phase. In the milieu, Chinese mills have started pushing volumes into the global market at highly competitive prices. Between January and November this year, exports from China have increased 35.6 per cent to 82.7 million tonne. In fact, Chinese exports to India have also surged.
Strong growth momentum has supported steel prices in India, and import volumes have increased significantly, driven by better realisation opportunities, the report said. As of November, this fiscal, India had imported 4.26 MT of finished steel, up 13.4 per cent on-year even as its exports declined 6.2 per cent to 4.03 MT, making the country a net importer of finished steel.
“Last fiscal, steel imports were around 5.6 per cent of domestic demand at 6.7 MT. We expect imports to be around the 5.5 per cent mark this fiscal, too. Although global prices increased in November, by 23 per cent in the USA and 6 per cent in Europe, a few domestic steel mills have cut prices by Rs 1,500 per tonne in December from the October list prices with an eye on local demand. That is likely to curtail imports in the coming months,” said Sehul Bhatt, Associate Director, Research, CRISIL MI&A.
China has been the largest beneficiary of the uptick in imports, beating South Korea as India’s largest import partner. As per data available till October 2023, CRISIL said, finished steel imports from China totalled 1.1 MT, up 47 per cent on-year, closely followed by South Korea at 1.09 MT, down 15.9 per cent.
Among the ports, Mumbai remains the preferred destination for both alloy and non-alloy imports, accounting for 40 per cent of the total imports, followed by Mundra and Chennai. This imbalance of volume at the ports leads to regional disparities in domestic prices.
Robust domestic demand, weak global markets and competitive Chinese steel have led to limited exports despite a low base. Per the findings of the report, exports declined ~72 per cent in September, 20 per cent in October and 31 per cent in November. Exports to UAE and Belgium were down 46 per cent and 10.5 per cent, respectively, though exports to Italy, Nepal and Spain increased 31 per cent, 16 per cent, and 71 per cent, respectively till October.
“The recent recovery in European and American steel prices augurs well for Indian flat-steel producers. European steel prices, after remaining subdued for 5-7 months and hovering at €550-600, have started recovering since November, leading to a pick-up in export bookings from India. This follows a period where European steel prices fell below domestic steel prices for the first time in a decade,” said Miren Lodha, Director, Research, CRISIL MI&A.