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India’s steel exports to drop 35-40% this year after duty revision, prices are already down by Rs 5,000


NEW DELHI: India’s steel exports are expected to drop 35-40% on-year to 10-12 million tonne this fiscal following the 15% export duty imposed on several finished steel products last month, according to data analysed by Crisil Research.
Steel exports, which had reached a record high of 18.3 million tonne last fiscal, continue to see momentum because of the disruption caused by the ongoing Russia-Ukraine conflict.
Russia is a key exporter of steel, coking coal and pig iron. In addition, the European Union’s (EU) move to raise India’s export quota – amid a widening differential between steel prices in the two geographies – benefited domestic steel makers, and limited the impact of a 25% tariff on steel imports imposed by the EU.
“The duty-driven price correction will improve availability of steel in the domestic market as finished steel exports dwindle. This will directly impact India’s export volume in the current fiscal. Steelmakers will attempt to skirt the duties by bumping up exports of alloyed steel and billets, but that is unlikely to compensate for the loss of finished steel exports,” said Hetal Gandhi, Director, CRISIL Research.
While steel firms enjoyed fat realisations overseas, domestic demand grew 11% on-year, driving domestic prices to all-time highs, said the report.This in turn resulted in soaring construction costs and multiple price hikes by makers of automobiles, consumer appliances and durables to pass on the increase, thereby tamping domestic demand.
The hike in export duty was aimed at curbing inflation.
The government also hiked the export duty on iron ore to 50% and that on pellets to 45%, alongside slashing the import duty on coking coal, pulverised coal injection (PCI) coal and coke to 0% from 2.5%.
“The duty revisions will have a material impact on the export volumes of iron ore and pellets. Unlike steel, where specific grades were targeted, iron ore and pellets are effectively under a blanket export duty. The combined export volume of iron ore and pellets is expected to see a massive drop from 26 MT last fiscal to 8-10 MT in the current one, and bring about a sharp correction in domestic prices,” said Crisil.
Merchant miners have already reduced iron ore prices by 25-35% since the announcement.
The export duty imposition on steel and iron ore by the government was able to tame the uncapped rally in domestic steel prices. Steel prices (ex-factory) which averaged Rs 77,000 per tonne in April, had already cooled off by Rs 4,000-5,000 per tonne in early May in line with global prices.
The duty imposition has driven prices down further, as current prices stand close to Rs 14,000-15,000 per tonne lower than the April peak.
Further, global prices have also corrected.
Falling steel prices, in turn, have aided recovery in domestic demand.
” Auto production and construction activity picked up in June. With monsoon setting in, a seasonal moderation in demand is expected, which will put further downward pressure on steel prices. Correction in steel prices was already on the cards as global prices started correcting. The duty revisions have alleviated the uncertainties linked to global markets and set the tone for a quicker correction in the near term. As of mid-June, prices are already at Rs 62,000-64,000 per tonne and can be expected to trend below Rs 60,000 per tonne by the end of the fiscal,” said Koustav Mazumdar, Associate Director, CRISIL Research.



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