MUMBAI (CU)_Over the recent months, China’s steel exports have been escalating rapidly and therefore, in May, the government announced the abolition of rebates with the aim of discouraging exports and allowing prices to cool off. However, the move failed to have the desired effect, as steel exports from the East Asian nation rose to 6.5 million tonnes (mt) in June, amounting to a 23 per cent increase from the previous month and a 75 per cent increase from a year ago.
Accordingly, experts believe that there is a higher risk of Beijing imposing a tax on steel exports to get exports and domestic steel prices under control. While the move would raise regional steel prices on account of the tightened supply, it would create lucrative opportunities for steelmakers from India, world’s second-largest steel manufacturer after China.
“Given the Chinese government’s objectives to control steel production and emissions as well as cool domestic steel prices, we believe higher exports raise the risk of the imposition of an export tax,” brokerage firm Motilal Oswal said in its report published on Thursday (15 July).
In terms of the global market, during the five months leading up to 31 May, steel production recorded a growth of about 15 per cent from a year earlier, with China and India being the leading suppliers. Accordingly, the high export demand, coupled with supply shortages, have expanded the profit margins of Indian steelmakers over the past few quarters. While this improvement in the supply-side situation would most likely ease any further rise in steel prices, however, according to Care Ratings, global prices are not expected to witness any steep correction from their peak levels.
On the domestic front, as India begins to recover from the second wave of COVID-19, experts believe the industry will experience a bounce back over the coming months as infrastructure and construction industries resume operations.
