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Indian crude steel tops 100mt in 2017

25 January 2018 Marian Hookham

In 2017 India’s steel sector achieved a long-anticipated new record, producing 101.23 mt of crude steel over the calendar year, up 5.87% on 2016, according to the Joint Plant Committee (JPC).

Traders say they currently have more orders for coking coal than they are able to fill to support the rapidly recovering sector. Other sources point out it’s highly unlikely any Indian steel mill will be willing to buy a full cargo of coking coal, given the price is currently a few dollars either side of $260/t FOB Australia.

As reported on Friday, the most recent fixed price deal was done last week for a cargo of Moranbah North coal at $259/t FOB to be delivered to India. It is believed this cargo is destined for stock and sale disbursement among a number of buyers in India.

Meanwhile, also noteworthy in last week’s data release from the JPC were the 53% jump in exports of finished steel to 7.6 mt and an 11% reduction in steel imports to 6 mt.

Increasing steel exports is a government aim, as outlined by Union Steel Minister Birender Singh to local media, saying exports should account for 6-7% of India’s total steel production in the next few years. The nascent recovery of India’s debt-laden steel sector has been helped by global anti-dumping measures targeting Chinese steel.

This, coupled with improving economic conditions in India has driven Indian steel mills to seek additional coal from destinations other than Australia.

Growth in India’s steel output will be needed to support ongoing GDP growth, forecast to pick up from 6.5% in fiscal 2017 (to 31 March), to 7.4% in fiscal 2018. In the eight months from April to December 2017, Indian crude steel production grew 4.6% to total 75.498 mt, according to data from the JPC.

The major Indian steel producers - SAIL, RINL, TSL, Essar, JSWL and JSPL - contributed the bulk of the growth, producing 43.39 mt up 6.5% over same period of last year. Output from smaller producers grew less impressively at 2.1% to total 32.1 mt.

The increased health of India’s steel sector is creating some anomalous commodity movements as buyers struggle to get sufficient coal supply from Australia. Despite India’s impressive growth in crude steel output in 2017, data from the Australian Bureau of Statistics revealed that Australian exports of metallurgical coal (hard coal and semi-soft/PCI) in the 11 months to November dropped to 36.7 mt from 39.6 mt in the same period of 2016.

As reported previously a host of issues impacted Australian coking coal flows in 2017, including weather disruptions, mining issues and queues at ports. Interestingly, the data also shows India imported 3.477 mt less Australian hard coking coal in the calendar year to November 2017, but 0.57 mt more semi-soft/PCI coals.

Sources said this highlights a developing trend in India to use greater volumes of lower quality coals from other origins, such as the United States and Mozambique.

US export data for 2017 hasn’t been finalized, but already India is on trend to increase uplift of US met coal to 3.20 mt, up 28% year-on-year. Mozambican coking coal exports to India are estimated at around 3 mt for 2017.

Metallurgical coke imports have also benefited from the Chinese market withdrawal. Statistics show China’s total coke exports dropped 20% to 8.09 mt last year, which meant Indian mills have had to find replacement coke from other sources.

In January several small coke cargoes for India are scheduled to load from Latin America including a highly unusual Mexican coke cargo, according to sources, given Mexico is usually a net importer of coke.

Learn more about our metallurgical coal coverage.

Marian Hookham is a research and analysis associate director at IHS Markit.
Posted 25 January 2018

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