Indian steel mills cut stocks as exports pick up pace

Indian steel producers reduced their product inventories in August and September on the back of an acceleration in exports amid a domestic demand slump.

Inventories with steel mills were at 13.69mn t as of 30 September, down by 8pc from 14.89mn t on 1 August, the highest level of unsold mill stocks in the 2019-20 fiscal year that started 1 April, according to the ministry of steel. Stocks on 30 September were still higher than the 12.82mn t on 1 April.

India's crude steel production in September fell by 5.2pc from a month earlier to 8.42mn t, while consumption fell by 5.3pc to 8.34mn t. April-September crude steel output was 1pc higher from the previous year at 54.59mn t, while consumption rose by 5pc to 50.87mn t.

Slower economic growth and a continued slump in automotive demand that could extend into next year is affecting steel consumption and pressuring profit margins of steel producers, Indian Steel Association secretary-general Bhaskar Chatterjee told Argus in an interview in Mexico.

Infrastructure funding, which had been the key driver of steel demand in the past decade, has slowed considerably over the past year as a widening fiscal deficit has reduced the space for further public spending. The real estate sector has been stalled since the demonetisation of large-denomination rupee notes by the government in 2016 to curb tax avoidance, while private-sector investment in new facilities has been at a halt as most sectors have excess capacity.

"Indian steel companies have lowered their export offers to offload their surplus inventories in the overseas market," said the steel ministry in its monthly report for September.

Exports of finished steel have increased since July this year with India becoming a net exporter of finished steel last month. Exports of finished steel in September increased by around 73pc from the previous year to 1.02mn t, while imports fell by 16.3pc to 565,000t.

Indian hot-rolled coil (HRC) exports have become competitive in European and southeast Asian markets, offering among the lowest prices over the past few months.

December-shipment material from Turkey and India was offered at €370-395/t cif Italy compared with Japanese HRC at €395-400/t cif. Offers for SAE grade HRC were at $418-420/t cfr Vietnam from India, $430/t cfr Vietnam from Japan, $430-435/t cfr Vietnam from South Korea and $435-450/t cfr Vietnam from China.

source: Argus Media