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Steel exports riding on rich realisations
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SME Times News Bureau | 12 Apr, 2021
The high prevailing price of steel globally has built a strong ground
for domestic steel makers to test overseas market for growth with
competitive price offerings.
According to a research report from
Crisil, in January-March 2021, domestic steel prices rose slower than
global prices, which widened the spread between landed global prices and
domestic prices to 19 per cent in March from 2 per cent in October.
This,
the ratings agency said, drove exports up 126 per cent on-year in March
to 1,290 kilo tonne (KT), compared with a monthly average of 650-750 KT
in recent times.
Interestingly, while exports of finished steel
in the first quarter of fiscal 2021 (April-June, 2020) were driven by
lacklustre domestic demand due to lockdown and and demand destruction
due to the pandemic, the surge in the last quarter was led by higher
export realisation.
Overall in fiscal 2021, exports increased 29
per cent. The momentum is expected to continue and push finished steel
exports another 12-16 per cent higher this fiscal, Crisil said.
Interestingly,
there were variations in the geography mix of exports last fiscal. In
the first half, China accounted for 30 per cent of finished steel
exports. In the third quarter, however, that number plunged to a mere 8
per cent with January and February seeing negligible exports. In
contrast, the share of the European Union surged from 13 per cent of
exports in the first quarter of last fiscal to over 39 per cent in
January-February.
The exports would be supported by three
factors: Expectation that global steel prices will remain elevated,
especially in the first quarter of this fiscal, before cooling
sequentially. Also, widening spreads between export and domestic
realisations will support exports. Lastly, the expectation that
incremental supply will exceed incremental demand with the commissioning
of 6 million tonne of new supply.
After a brief cooling phase in
February this year, global steel prices have continued to rally and
touched $830 per tonne in the last week of March, the highest in the
past 12 years.
Healthy demand in China, low-base effect of the
January-March 2020 quarter, and small steps towards de-carbonisation
that's impacting supply lifted global steel prices to $690 per tonne on
average in the last quarter of fiscal 2021, compared with $483 per tonne
in the same period a year before. Iron ore supply hiccups at mines in
Brazil and Australia also lent lift.
Domestic prices are expected
to remain elevated through the first quarter of the current fiscal,
with average price hikes of Rs 5,000 per tonne likely sequentially,
Crisil said.
But from the second quarter, both global and
domestic prices would cool sequentially. For the current fiscal, they
are expected to increase 13-15 per cent on-year.
Supply-tightening reforms in China and the second wave of Covid-19 are the key monitorables.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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