Korea tops India's steel importing countries list in CY22

India's steel imports were dominated by South Korea in calendar 2022 (CY22), reveals data maintained with SteelMint. At a hefty 2.40 million tonnes (mnt), this Southeast Asian country stole a march over the rest of the top four exporters to India - Japan, China and Russia.

Japan came second but volumes fell short of South Korea by a whopping 1.70 mnt at 0.69 mnt. China was a close third to Japan with 0.65 mnt while Russia surprised with an almost five-fold increase to 0.35 mnt compared 0.06 mnt in 2021 and the minuscule 0.1 mnt it averaged over 2018-2021.

India's total steel imports in CY22 touched 4.91 mnt, up 25% compared to 3.94 mnt in 2021.

Commodity-wise break-up

India's flat steel imports in 2022 comprised a overwhelming 91% of the total, at 4.45 mnt. Finished longs had a 5% share at 0.26 mnt while semi-finished brought up the rear with the balance 4% at 0.19 mnt.

Factors that aided y-o-y rise in imports

1. Free trade agreements with Korea, Japan: India has free trade agreements (FTAs) with South Korea and Japan which have brought down tariff barriers. However, there are rumblings within Indian steel circles that the domestic industry faces disadvantages from these FTAs despite being the most cost-competitive among the major steel producers globally. Many feel there is a need to renegotiate these treaties due to the high cost difference between Indian and overseas mills, to scrutinize if there are any violations of Rules of Origin (ROO) and to amend the safeguard provisions. Both Korea and Japan have large surplus capacities and high exports-to-production ratio and thus both do pose a challenge to India's domestic mills, feel sources.

India and South Korea have set a bilateral trade target of $50 billion before 2030, as per a report.

2. Typhoon impact on Korean steel sales: In September last year, large parts of South Korea had been buffeted by Typhoon Hinnamnor, which not only impacted steel production but also led to a decline in sales. In fact, combined sales of two major producers dropped 22% m-o-m and 29% y-o-y in that month to 710,000 tonnes (t). Out of this, domestic sales fell 27% m-o-m and 42% y-o-y to 400,000 t. Total sales of hot-rolled plates stood at 7.91 mnt in January-September 2022, down 7.5% y-o-y. Of this, domestic sales accounted for 5.2 mnt, down 9.8%, while exports were at 2.71 mnt, down 2.7% y-o-y.

A drop in domestic sales prompted Korean mills to further explore export opportunities. As a result, HR/plate exports escalated to 1.05 mnt last year, comprising 44% of Korea's total of 2.39 mnt.

3. Russia seeks alternate export destinations: The Western world's sanctions on Russia goaded it to seek out alternate export geographies and India was one of them, with volumes inflating to 0.35 mnt. Historical data reveals Russia was not a large steel exporter to India but 2022 stood out as an exception. The years 2020 and 2021 especially saw a negligible 0.05 mnt and 0.06 mnt being imported respectively.

4. Price viability: Imported material, of which HRC/plates comprised 33%, landed cheaper than domestic hot rolled coils (HRCs) in India. For instance, SteelMint's data reveals, as domestic trade-level HRC prices started dropping from May last year, so did the landed imported prices from FTA countries. July 2022 saw an inflection point when both prices converged at INR 59100/t ($721/t). Thereafter, the landed imported prices remained lower than India's domestic, falling to a record low of INR 47,700/t ($582/t) in November, when domestic ruled at INR 56,000/t ($683/t).

This offered domestic end-users price viability, a trend that continued till January 2023. But buyers started returning to the domestic market from December 2022, when India's prices had declined a bit and in any case it marked the onset of the peak demand season. Globally, domestic prices had started tapering off from the middle of last year, which also dragged down import prices.

5. China's exports surge: Import volumes from the giant rose a sharp 78% as it battled a second severe Covid surge and consequent fall in domestic demand, especially from the property sector. Finished flats imports were at 0.57 mnt against the total of 0.65 mnt. Even though China has officially adopted a policy of exporting value-added, high-end steel, certain basic grades have continued to be exported because of geo-political and pandemic compulsions.

Outlook

Imports from FTA countries may continue till these treaties get renegotiated. However, with prices on an upswing globally, landed imported prices will rise in tandem, which may discourage Indian buyers.