JSPL switched its attentions toward exporting steel at the start of the coronavirus outbreak earlier in the year, but it was only following India’s imposition of a lockdown in March that the steelmaker really shifted its strategy into top gear.
“We had started very humbly booking some export orders, and we found that demand was coming from all over the world - especially for finished steel from Europe and the Middle East, and for semi-finished steel from Asia,” Sharma said.
“But the moment that the Indian government announced a lockdown, we resumed export bookings and we sold more than 500,000 tonnes of steel,” he said. “That saved us - I would say - and we kept our plants fully running.”
Export orders meant that JSPL was able to report a 5% year-on-year rise in steel and pig iron output in April
. That contrasts sharply with the fortunes of rivals such as JSW, which decreased production
after pausing some furnaces.
Lower-priced Indian steel has become particularly appealing to foreign buyers in recent months.
Fastmarkets’ price assessment for steel hot-rolled coil (commodity) export, fob main port India
is averaging at $381 per tonne so far in May. That is lower than the average export prices for HRC from both China
and follows a similar undercut during April.
Indian steel exports rose by 29.5% to 8.24 million tonnes in its fiscal year ended March 31, 2020, according to the country’s Ministry of Steel.
Sharma expects India to remain a key exporter for certain flat steel products this year. “I feel that the Indian mills may export a small quantity of HRC, but the export of cold-rolled coil, galvanized and color-coated steel will continue in big way,” he said.
Seizing the moment
Selling to the domestic market in India became increasingly difficult after the lockdown was imposed, Sharma said, and this coincided with some unique opportunities to service foreign markets.
“The domestic market was down and domestic consumers were unable to receive cargoes because they did not have people to unload, forklift operators and crane operators. Whereas, the ports were open and we thought ‘why not send material to [ports in] the eastern side of the country?’” he said.
JSPL has sold large tonnages of billet to China during the Covid-19 crisis, Sharma revealed, with Chinese re-rollers forced back into the import market for the semi-finished product in March
amid higher construction demand. He expects China to continue importing the semi-finished steel throughout this year.
JSPL has also found success in exporting to the European Union amid the pandemic.
“There was a big problem in Europe with the virus peaking in March and early April in Spain, Italy and Germany. Most mills were down or operating at reduced capacity and there was uncertainty in the market,” he said.
“Traders thought there could be a shortage of steel [in Europe] during May and June so they placed a lot of orders with us for plate,” he said.
JSPL has the widest range of plate dimensions in India, he added.
The steelmaker is also supplying bloom to the British Steel-owned rail mill in Hayange, France, which was previously serviced by the British Steel Scunthorpe plant in the United Kingdom, Sharma said.
The implosion of European steel markets in March caused the region’s steel association Eurofer in April to demand a 75% reduction in the quotas of steel imports allowed into the EU
, but Sharma thought such a move was unlikely.
In the post Covid-19 world, European countries will move toward self-reliance in making critical machinery rather than on cheaper Chinese manufacturing, he said.
With steel required to make these machines and European steelmakers operating at reduced capacity, there was little prospect of EU authorities further restricting imports, Sharma explained.
Doing business during Covid-19 is a challenge for any company - let alone one exporting enormous volumes of steel from a country in lockdown - and Sharma says support received from Indian authorities was pivotal to realizing JSPL’s export-led strategy.
The government’s decision to declare steel an essential industry during the lockdown
helped the mill, as did assistance from authorities in dealing with logistics.
“We approached the Railway Ministry and they said that inter-country transport was low because of the lockdown but ports are running because ports are international assets. [They said] ‘if you are exporting, we can support you,’” Sharma said.
Despite the lockdown, JSPL was able to bring raw materials such as limestone and iron ore to its plants via train, while rolling stock leaving JSPL’s factories were filled with steel bound for ports, Sharma told Fastmarkets.
“This kept happening and by the time other steel companies had realized, we had already shipped more than 250,000 tonnes of material,” Sharma said.
“Seeing us, the rest of the industry got motivated and also started taking orders for exports. [But] we are the largest exporter as of now.”
Given that JSPL both imports and exports using bulk vessels, the company has also been immune from one of the messiest elements of Indian trade during Covid-19: the container trade.
Indian container terminals have become overrun with stranded boxes in recent months with a lack of labor and bottlenecks in payments preventing cargoes from being cleared
Sharma believes Indian steel prices will perform more strongly in the coming two months than in the previous two, at least until monsoon rains begin to batter the South Asian country in early July.
“The moment that India’s automotive sector picks up, there will be large demand for CRC and coated steel along with forgings,” Sharma predicted.
That may even cause a spike in Indian coil imports from countries that have a free-trade agreement with India such as Japan, South Korea and Vietnam, he said. HRC and CRC will likely be among the main products sourced, he added.
Sharma expects construction activity to also gain momentum, with around 450 infrastructure projects nationwide scheduled to start between May and July.
Despite the many challenges posed by Covid-19, he is confident that India will record year-on-year rises in both gross domestic product and steel production for 2020.
But Sharma reserves the most ambitious target for his own company. He aims for JSPL to produce 8 million tonnes of steel across India this year - that would be an increase of more than 29% year on year from 6.2 million tonnes in 2019.
Achieving this target will make JSPL's success in the Covid-19-shaped export market all the more significant.