Indian steel makers are eyeing a window of opportunity in export markets as the
rupee tumbles against the US dollar in the aftermath of the government’s demonetisation
move. With international prices moving up, the timing couldn’t have been better for domestic companies battling weak demand at home.
“Exports are a good option. International prices have improved and this is giving us an impetus. We are increasing focus on countries and
regions we have been exporting to,” Vikram Amin, executive director (strategy & business development) at Essar Steel India, said. Global
steel prices have firmed up, with benchmark hot rolled coils (HRC) hovering in the range of $505$515 free on board (fob) per tonne. While
Essar Steel hopes to maintain a steady ratio of exports at 2025% during the year, the company said it could also explore the possibility of
increasing exports.
Much of the increase in steel prices have come as a result of a hike in cost of production. Prices of both coking coal and iron ore, the two
main raw materials for producing steel, have shot up in the past few months. Global steel prices, along with those in China, the world’s
largest steel producer, have risen 56% yeartodate, bringing idle capacity on stream.
Essar, which produces a range of flat products including plates, coils and coated products, is seeing a stabilisation in the market after the
initial uncertainty surrounding demonetisation. Retail sales are gradually regaining their rhythm, and sale of flat steel products that are
mainly used in consumer goods and automobiles, are getting back on track in step with user industries.
Steel exports have been on the rise since September this year. During September 2016, exports rose to 0.6 million tonne, up a whopping
111% over September 2015, according to data from Steel ministry’s Joint Plant Committee.
JSW Steel, one of the country’s largest private sector steel players, said it is also seeing a pickup in exports. The company exported 1.6
million tonne of steel in the first sixseven months of the year and has already crossed the volumes it did for the whole of last year.
“International prices are correcting upwards mainly based on cost push factors,” Jayant Acharya, director commercial and marketing, JSW
Steel, said. JSW said its exports are clawing back to earlier levels after suffering a significant fall in the previous year (FY16). The year
before that (FY15) it had exported over 3.1 million tonne. The company usually exports 20% of its steel. “The first half has been better and
sales have picked up. We hope to maintain our regular export volumes this year,” he added. A ramp up in capacity at its cold rolling mill
and addition of new products in portfolio have also helped the company to improve overseas sales. JSW Steel, which exports to nearly 90
countries, said while a weaker rupee is likely to help boost exports, much of it would also depend on the relative depreciation of the local
currencies against the US dollar.
An improvement in exports could also give some companies a chance to offset lackluster demand at home. Overall domestic demand
remains low mainly due to lowerthanexpected construction and infrastructure activity. According to industry experts, while steel demand
is likely to pick up in the post monsoon period, it will still be 1520% lower this year. Domestic consumption grew 3.6% in the first half of the
current financial year to 41 million tonne, even as finished steel imports declined 37.3% to 3.6 million tonne during April–September 2016,
driven by government’s protective measures such as minimum import price, antidumping duty and safeguard duty, as per the Joint Plant
Committee.
Source: ET