Home / Commodities / Freight News / Fluctuating trend: Steel exports must continue to sustain production

Fluctuating trend: Steel exports must continue to sustain production

During the first four months of 2021, the global steel industry has produced 663 MT of crude steel which is around 14% more than last year. China had rolled out 375 MT of crude steel in the period (56.5%) that exceeds last year’s level by 16%.

Production growth of a critical commodity signifies a positive outlook for the metal sector. It is reported that both the US and the EU are passing through some sort of supply shortage as both these markets have restricted steel imports, the former with the help of additional duties on import of steel and aluminium (25 and 10%, respectively) under Section 232 of the US trade Act and the EU by imposing tariff-cum-quota system against traditional import sources of South Korea, Japan and Turkey.

Backed up by increased Government spending on Infrastructure (President Biden’s recent announcement of $2 trillion Federal investment) with emphasis on Buy America policies and stimulus expenditure in France and Italy, the practice of augmenting inventory in a rising market by merchant traders, service centres and OEMs fired the fuel.

As a result the daily affected rate of Covid in India, along with the daily mortality rate have shot up. Nationwide lockdowns are now replaced by localised lockdowns with allowance for the industry to continue operation with limited number of employees. This trend is indicative of a growing advanced countries on one side and subdued economies of the emerging developing countries (excluding China) pulling up its resources to fight the menace on another side.

China is presenting a curious scenario. In an effort to curb air pollution and CO2 emissions, the Chinese Government is limiting steel production. Although the production growth in the first four months of 2021 does not indicate that the industry is falling in line with the government line of thinking, the domestic demand is showing a rising trend (rising inventory accumulation by traders and construction companies, more capital spending by industrial companies and more residential construction by households). Based on March’21 production in China, the annualised level of Crude steel production for China has been assessed as 1.107 billion tonne in 2021 which is 5% more than the production level of 2020. Rising steel production by China necessitated a growing demand for raw materials, scrap, iron ore and semi-finished steel. Chinese domestic market prices of steel have been on a northbound journey.

In response to the requests made by project authorities and a few major OEMs, the Chinese government has advised the steel producers strongly to curb steel production. Two recent measures announced by Chinese government are interesting. With effect from 1st May’21, all export rebates applicable (9-13% VAT rebates) is withdrawn which means that Chinese export offers for HRC, rebar, rounds would go up. The HRC SS 400 ex Chinese port was $ 881/t in last week of April’21 and reached $ 898/t I on 29th May’21 before rising to $1018 in third week of May’21.This has helped Indian exporters to raise their offers for HRC for Vietnam. Second, the booming Chinese economy (GDP to grow by 7.5-8.5% over 2020) is exhibiting all signs of growing steel demand as merchandise exports are up, consumer spending is on the rise and capex is substantial.

The crude steel production by India during April’21 was 8.3 MT which is significantly higher compared to last year’s level when the country was knee-dip in the Covid crisis with a total lockdown and thus this monthly growth needs to be sustained throughout the year and need not be once-in-a-year type. It appears that partial lockdowns in different pockets in May’21 would result in a subdued demand phase in June;21, likely to be over by Mid July’21.
It depends on the intensity of 3rd and 4th wave of the Covid in influencing he domestic demand. The export efforts in steel must get strengthened in the coming months with the above changes in Chinese policies which would surely make export offers higher. It is the right time for steel exporters from India to widen the export basket, outreach many other spaces hitherto unexplored and improve necessary quality upgradation in the product range to establish an export-oriented steel industry.
Source: Financial Express

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping