Indian steel exports struggle against China’s ultra-cheap shipments

New Delhi: Indian steel exports are struggling and are likely to face continued challenges, as overcapacity and weak domestic demand in China prompt the world's second-largest economy to flood the global market with ultra-cheap steel.

India's steel exports in May 2024 were recorded at 0.5 million tonnes (mt), nearly 25% lower month-on-month (m-o-m) from around 0.66mt in April, per provisional data available with BigMint, a market research and consultancy firm.

“The steel export market is currently distorted and lacks attractiveness due to China’s continued strategy of flooding the global market with low-priced steel. Low domestic demand in China is leading to substantial exports at prices below the cost of production,” Ranjan Dhar, director and vice-president, sales & marketing, ArcelorMittal Nippon Steel India (AM/NS India), told Mint.

According to a report by BigMint, export prices of hot-rolled coil coming from China have fallen to $520 per tonne from $525 per tonne within a week, leading to a continued pressure on global steel prices. In comparison, Indian export prices hovered in a range of $650-$660 ( ₹54,500- ₹55,000) per tonne, higher than China's rates.

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China's crude steel production rose 8.1% m-o-m to 92.86mt in May, from 85.94mt in April. In May last year, China's crude steel production stood at 90.4mt.

China exported around 94mt of iron and steel products globally in the calendar year 2023, a 38% increase over 2022, according to a recent Crisil report. “This number may likely rise to more than 100mt this calendar year,” said Dhar.

This also means an uptick in exports from China to India. According to a steel ministry report, value of Chinese steel exports to India rose from $391.67 million in March to $434.01 million in April this year.

Balancing Act Amid Global Challenges

According to provisional government data, India's finished steel imports stood at 8.3mt in FY24, up 38%. China, South Korea, Japan and Vietnam were the major contributors, the Crisil's report on the sector said.

Weak global demand and falling input costs have weighed on steel prices. Coking coal prices fell 7% week-on-week to $239 per tonne FOB (free on board) on 21 June, according to BigMint.

This has prompted Indian steel mills to focus on domestic demand, as exports remain a margin-dampening prospect. While competitive prices in West Asia and Southeast Asia remain a concern, the situation in Europe is deteriorating due to weak demand and a rigorous regulatory environment in play.

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“Major competition for Indian steel exports is evident in the Middle Eastern and Southeast Asian markets, where China continues to flood the market with cheap exports, putting pressure on Indian mills. With European demand also remaining weak, Indian producers are increasingly focusing on the domestic demand,” said Dhruv Goel, chief executive officer of BigMint.

However, domestic demand environment is not particularly strong, either, as monsoon rains and budget-related uncertainties weigh on prices. India exported steel worth ₹98,117 crore in FY24, down from ₹1.07 trillion in FY23.

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"India stands out as a bright spot in the global steel market. Although domestic demand is currently sluggish, it is expected to rise with a renewed focus on capital expenditure by both the government and the private sector,” added Dhar. “However, India must remain vigilant in its growth efforts, as cheap Chinese imports pose a serious threat."