India’s unexpected imposition of the export duties on various products, including hot rolled coils (HRC) has been the principal development in the global flat steel market this week. Since the country is a large and sustainable HRC supplier to many regions, including Asia, MENA, Turkey and the EU, market players have been trying to evaluate the possible outcome of the Indian government’s move. Still, despite concerns, HRC prices globally have once again decreased over the week, given that for now the unfavourable market fundamentals are having a stronger effect on suppliers, compared to the assessed effects of India’s export tax.
The Indian government has waived import duties on some key steelmaking raw materials like coal and has imposed 15 percent export duties on finished steel products, including HRC, aiming to reduce prices despite criticism from the domestic steel industry. This move will likely lead to lower investments and production as well as an increase in semis exports (which is not covered by duties) and a drop in domestic steel prices. Most market sources agree that sales of HRC from India will be reduced under the current conditions, but again they will continue in some volumes in Europe, for instance, where the overall market level is higher.
Europe will remain the main sales destination for ex-India HRC. Aside from the issues to be handled with the already-booked and not yet customs-cleared materials from India, the European buyers will be evaluating India’s future positions in the market. In theory, India is expected to lose some of its flexibility in terms of becoming aggressive in some periods in order to sell off some excessive allocations. Most market players expect that, in the case of offers and sales from India, the 15 percent duty will be assumed by sellers and so will decrease their margins. Moreover, Indian mills are checking the possibilities of exporting boron-added HRC (the same as China) to avoid the duty as it is only for non-alloy steel. India’s steel exports are likely to decline in other major markets like the Middle East (the UAE), Turkey, and Southeast Asia, at least in the near future, which will exert a positive impact on China’s steel exports amid alternative opportunities.
The ‘notional’ ex-India HRC price has been set by SteelOrbis at $790-830/mt FOB, against $790-850/mt FOB a week ago, but no deals or even negotiations have been reported as many mills have withdrawn offers, trying to figure out the processing of already-signed contracts.
HRC prices in Turkey went down from $870-930/mt ex-works last week in a few steps to around $850/mt ex-works as the highest workable level, sources report. Prices of $820-840/mt ex-works are also reported to have been available for large buyers. Local demand has remained insufficient due to the large amount of stocks and the still unfavorable situation in the coated and cold rolled coil segments. Exports have also remained challenging due to tough competition with Asian sellers in the European market. Therefore, according to sources, Turkish mills are still not sold for July and this is putting pressure on their pricing. However, by the end of the week, some mills have returned to $860/mt ex-works levels and above in indicative offers. Most market players believe it is an attempt to create positive sentiment among the buyers, but once again most of them think such moves will not be successful.
In the European market, domestic HRC prices have settled at €980-1,000/mt ex-works in the southern region and at around €1,050/mt ex-works in the northern one. Still, despite a €20-50/mt decline, buyers are not in a rush to restock, thinking that the prices are set to decline further. Still, India's decision to impose 15 percent export tax on finished steel, including HRC, affected the mood in the European market, since it is one of the sustainable sellers to the region. However, while some sources expect that India’s situation may help break the downtrend, while others foresee local HRC prices in the EU will decline to €900/mt ex-works, at least in the Italian market. In the meantime, import prices in the southern part of the EU have declined by €40-50/mt on average to €840-890/mt CFR Spain from Asia and to €900/mt CFR from Turkey. While the bids from local buyers are even lower than that, some sources believe that India’s export duty imposition may restrict a further price drop in the import segment.
In Vietnam, the reference price for import SAE1006 HRC has tumbled to $755-760/mt CFR, down by $25-30/mt week on week, considering the recent deals signed with Chinese suppliers at $760/mt CFR this week and the continuous drop in offers coming from China. Besides, most market insiders expect the workable level to drop to $740-750/mt CFR next week. Furthermore, Vietnamese customers have reported several deals done for ex-China SS400 HRC at $730-742/mt CFR levels, down by $13-25/mt week on week. Meanwhile, Indian HRC suppliers have not come with new offers to Vietnam due to the unexpected imposition of 15 percent duty in India. Other foreign suppliers like those from Japan and Taiwan have continued to stay out of the Vietnamese market.
Chinese HRC exporters have continued to reduce their prices considering the strict measures in many regions of China along with the rainy weather in the country, which have affected demand and prices locally. Export offers for boron-added SS400 HRC given by the large Chinese mills have settled at $745-760/mt FOB, compared to $770-800/mt FOB last week. Meanwhile, the tradable level for ex-China SS400 HRC has been voiced at $720-750/mt FOB, though the higher end of the current range is only for some rare markets. Several deals for ex-China HRC are reported to have been signed with Vietnamese buyers at $730-742/mt CFR, down by $13-25/mt week on week, while customers in Pakistan have reported new deals for SS400 HRC at $770/mt CFR. Meanwhile, domestic HRC prices in China are at RMB 4,820-4,930/mt ($720-736/mt) ex-warehouse on May 27, with the average price level RMB 30/mt ($4/mt) lower as compared to May 20, according to SteelOrbis’ data.