Robust domestic demand to keep India’s steel exports to Europe muted in FY24

Representative Image

India’s steel exports to Europe will likely stay muted this financial year because of robust domestic demand, a weak continental economy and a build-up of inventories.

Production disruptions in Europe because of maintenance shutdowns and other reasons aren’t likely to translate into gains for Indian steelmakers. A weak European economy and inventory buildup mean demand for the alloy will be muted, playing spoilsport for steel exporters, rating companies say.

Also Read: India steel imports from Russia rise to eight-year high in April-January

Blast furnaces in Europe were under maintenance in April, after production disruptions at two ArcelorMittal facilities were reported in March. The two developments caused the suspension of 8.3 million tonnes per annum of production, which would take 3-4 months to be operational, Motilal Oswal analysts wrote in an April 18 note.

According to industry estimates, Indian steelmakers combined shipped 40 percent of exports to Europe alone in FY23. Indian steel exports to Europe in the last fiscal year were hit by an export duty enforced by India between May and November.

Despite the removal of the export duty, Indian steelmakers are unlikely to expand exports to Europe over last year, executives with rating agencies said.

Robust Indian demand, European inventory buildup

“Post export duty rollback, Indian exports have seen reasonable improvement, however, still far lower than the peak exports volumes achieved in FY22,” said Hitesh Avachat, associate director, CareEdge Ratings.

Ritabrata Ghosh, vice president and sector head at ICRA, said, the credit assessor expected the current year’s exports to Europe to remain at the volume level of 3.5 million tonnes achieved in FY23.

At play, the two executives said, are factors such as India’s own robust demand, Europe’s weak economy and a buildup of inventories. They also pointed out that maintenance shutdowns were typically timed around weak demand periods, allowing for a limited rise in Europe’s import needs.

“Subdued demand in Europe is likely to negate any potential gains from the removal of export duty in India. Maintenance shutdowns are generally timed with weak demand periods, and supplemented with a buildup of inventory levels. We do not expect this to give any specific push to volumes from India to Europe,” explained Ghosh.

Also Read: Steel ministry official exhorts industry to utilise Rs 4,000-crore PLI kitty

Limited export premium

Avachat of CareEdge told Moneycontrol last week that UK's energy and raw material costs are currently high and steel demand muted, making it a favourable time for maintenance shutdowns.

He added: “Indian domestic demand remains robust. Given the muted demand for European markets, export premium are limited and so Indian players are limiting their exports, as the domestic market is protecting volume growth. If International prices move up further, which was witnessed in the last 3 months, then Indian players will tend to increase their export volumes.”

Prices in Europe have seen a correction but still remain on the higher side.

“In Europe, prices have come off by $30/tonne to $785-830/tonne, but remain relatively higher owing to production disruption at ArcelorMittal’s plants in France and Spain,” ICICI Securities analysts wrote in an April 20 note.