JSW Steel optimistic about Indian demand

India's steel demand will pick up in the coming months as consumption remains firm from a year earlier despite a hit to economic activity from a second wave of Covid-19 infections, Indian private-sector producer JSW Steel said.

Steel demand rose to around 25mn t in April-June — the first three months of India's fiscal year ending March 2022 — compared with 12mn t a year earlier when the Covid-19 pandemic stalled economic activity, company officials said. The first-quarter demand was slightly lower from 25.19mn in pre-pandemic April-June 2019. Total consumption for the year will be around 110mn t if demand picks up in the coming quarter, company officials added. India's finished steel consumption reached 94.89mn t in fiscal 2020-21, according to the steel ministry.

India was battling a spike in coronavirus cases during April-May, which forced several states to impose localised lockdowns.

Argus assessed the average domestic India hot-rolled coil (HRC) price at 66,125 rupees/t ($888) to date in July, down by 4.7pc on the month.

But Indian steel prices are at a discount compared with international prices or the landed cost of imports as a result of weaker demand from an accumulation of inventories amid the spike in Covid-19 cases, the company said.

"The situation will stabilise probably post-July when inventories will come down substantially since exports from major Indian steel producers continue to remain stably upwards," said Jayant Acharya, JSW's commercial and marketing director.

Higher supplies

Global steel supplies rose sharply in the first half of the year in response to higher demand, driven by infrastructure spending and capital expenditure on the energy transition, JSW Steel said. Steel prices were up in the US, Europe and China in the first half of the year despite the higher supplies, the company added.

"So that clearly establishes that globally, notwithstanding [the] increase in supply, notwithstanding Russia putting a 15pc tax on exports and China withdrawing a 13pc rebate incentive on exports and the European Union extending the tariff rate quota for another three years from 1 July 2021, we have seen very strong demand that is absorbing the incremental supply in the market. That is quite positive for the steel industry outlook," said Seshagiri Rao, JSW's joint managing director and chief financial officer.

"European quotas for some of the products are exhausted but for certain other products, they are still available. We will be accordingly calibrating our exports to that market," Acharya said.

"We are developing alternate markets in and around the European regions other than the EU, in particular. Some of them we were already present, where we are increasing our supplies. We are increasing our supplies into Latin America, Mexico, apart from the Middle East and Asia," Acharya added.

The steelmaker said the cost of steel production had risen by 10pc on the quarter on account of higher iron ore and metallurgical coal prices. The company expects rising supplies to curb the rise in iron ore prices in India but for coking coal the "cost pressure will be there".

India's largest iron ore producer state-controlled NMDC reduced its iron prices for July in line with falling steel prices in domestic and global markets.

The month-to-date average of the Argus premium low-vol metallurgical coal fob Australia index stands at $206.24/t, the highest since May 2019.

By Sumita Layek