After muted CY22, can Indian steel exports bounce back in CY23E?

What’s Buzzing 

During CY22, Indian steel export (finished + semis) was at 10.4 million tonnes (MT), down 44% YoY. 

Context 

During CY22, Indian steel exports witnessed a sharp decline due to levy of export duty. In May 2022, export duty of 15% was levied on steel exports. The same was in force for six months until November 2022. 

Our Perspective: 

During CY22, export duty was prevailing for six months, which adversely impacted export volume of domestic steel players. However, since the withdrawal of export duty in November 2022, there has been a recovery in export volumes. India’s steel exports hit a seven month high in January 2023. As per media sources, during January 2023 steel export volumes were at ~0.75 million tonnes (MT) compared to ~0.55 MT in December 2022, indicating an increase of ~36% MoM. Also due to the recent devastating earthquake, Turkish steel mills in the quake-hit regions are likely to remain shut for about a month as power supply and logistics remain disrupted. Gas availability is also an issue, which is likely to impact production. Turkey is the world’s eighth largest steel producer and also one of the largest exporters of steel. In CY22, Turkey’s steel production was at 35 MT while Turkish steel exports for the year were at 14.5 MT. Due to the earthquake, Isdemir, Turkey’s largest integrated long and flat steelmaker with a liquid capacity of 5.8 MT, has suspended production till due diligence studies get completed. In general, large steelmakers in the affected region produce ~30% of Turkey's total steel production. Even when things normalise, there is likely to be limited export of steel especially of rebar and other products used in construction and infrastructure to ensure it has enough domestic supplies when required for reconstruction. This augurs well for domestic steel players as some of the global demand is likely to come India’s way thereby aiding players to enhance their export volumes. Also, global steel prices have witnessed an uptick thereby auguring well for domestic steel players.