Flat steel trade from India to the EU is due to pick up in 2023, at least in the first half of the year, as shorter lead times from Indian suppliers and competitive prices have opened up more arbitrage for sales to Europe compared with other exporters.
But volumes are unlikely to hit record figures amid sluggish demand and a challenging economic environment in the bloc.
EU buyers have increasingly become wary over procuring on long lead times in March-April, over uncertainty that EU price increases at the start of the year were the result of supply concerns and were not supported by downstream demand. Currently, Indian mills are able to supply for May-June shipments, and at prices of over €100/t below EU producers' targets for June-July deliveries. There is a short window of opportunity left for them to sell to Europe, before the summer holiday lull limits activity for the first half of the year. But already, data indicate that volumes are picking up.
Trade rising after export duty removal
Indian steel exports to the EU dried up in the middle of last year, after the Indian government imposed a 15pc export duty in May-November 2022 on several steel products including hot-rolled coil (HRC), cold-rolled coil (CRC) and hot dipped galvanised coils (HDG).
Previously, HRC imports from India to the EU rose by 109pc on the year to 1.37mn t in 2021, with India quickly becoming the benchmark price for EU imports, after anti-dumping duties were also imposed on Turkey, which has historically been a key supplier to the bloc.
But imports of Indian-origin dropped by 52pc on the year to 651,778t in 2022, according to Eurofer data.
Similarly, CRC imports rose by 92pc on the year to 530,375t in 2021 but declined by 24pc in 2022 to 404,273t. HDG imports climbed by 197pc on the year to 764,557t in 2021, but slipped by 50pc on an annual basis to 385,009t in 2022.
But since the removal of duties in mid-November 2022, Indian exports to the EU have picked up, especially also as Indian sellers could achieve higher prices there compared with in the Vietnamese or Middle Eastern markets — India's other major export destinations.
Indian HRC, CRC and HDG exports to the EU stood at only 13,100t, 14,200t and 30,200t, respectively, during July-October 2022, but jumped to 112,700t, 83,300t and 260,100t in November 2022-February 2023, according to Argus calculations from Indian steel ministry joint plant committee data.
"We expect decent volumes to the EU [this year]," an Indian seller said, adding that while blast furnaces that were shut in Europe last year are coming back on line, it will take some time for capacities to ramp up and Indian mills can book reasonable levels of orders until then.
Multiple EU producers idled capacities towards the end of 2022, on sluggish end-user demand, high production costs and ample import arrivals. Many of the idled blast furnaces have now been brought back on line, after EU prices rose sharply in December-February, and import penetration lowered.
"Providing the [safeguard] quota will still be kept, Indian mills are the most competitive in the market… and lead time is much better from Indian mills," an EU buyer said.
Total imports of Indian-origin steel products in Europe rose by 98pc on the year in calendar year 2021 to 3.36mn t but dipped by 27pc on the year in 2022 to 2.47mn t, according to data from Eurofer.
"Europe continues to be India's market of choice because it gives better realisation than other markets," another Indian mill said, adding that ocean freight rates to Europe are returning to near normal levels. "Container shipments to Europe are again viable now, so one need not depend only on bulk shipments. Now Indian mills can book multiple orders [even if the orders are of lower tonnage] instead of depending mainly on larger-volume customers alone for filling a break bulk vessel," he added.
Supply concerns pushing prices up
Indian HRC offers in the EU have risen to $830-840/t cfr Antwerp and south Europe, from $650/t cfr in December, and Indian sellers are bullish that more price increases will materialise in the near term, with higher prices in the domestic EU market and concerns of a shortage going into the second quarter.
"In every contract prices have moved up [for HRC] and there is still some appetite left in Europe," an Indian producer said. "For downstream products there is even better appetite because Europe is having shortages of cold-rolled, pickled oiled categories. So that means demand from the auto segment is not too bad in Europe since they are asking for downstream products as well," the producer added.
A force majeure at Tata Steel Netherlands has stoked concerns over a shortage of automotive grade material in Europe, while incidents at ArcelorMittal's sites in Spain and France more recently underpin EU buyers' increasing concerns over special grades supply.
Demand for HDG has also been firmer, as higher energy costs in the EU has end-users opt for imported downstream material as this helps them reduce and hedge their costs better, an exporter from a Japanese trading firm said, adding that Indian mills also are quite content, because they are able to utilise their downstream facilities.
Imports of Indian HDG into the EU show a 555pc month-on-month increase in January, when volumes reached 43,039t. CRC imports rose by 91pc to 19,010t. HRC imports, meanwhile, declined by 80pc to 3,279t, but by the end of March around 190,000t of HRC were imported in the first quarter from India, safeguards data tracked by Argus show. This compares with Indian HRC imports into the EU in October-December 2022 of just 35,836t.
"About 70pc of [Indian steel] exports would be towards Europe, because of pricing and as all the steel products can go to this market," a source at an Indian mill said. But the EU will not buy such high quantities for the rest of the year as after July and August the summer holiday period will slow demand, while material will also arrive by then and idled blast furnaces in the EU will also be contributing to inventories, the source added.
