Jump in steel exports helps industry clear stockpiles

Price stability in the global market has helped Indian steel manufacturers clear stockpiles through exports, which bounced back in quantity by an impressive 36% in December 2008, though sales realizations remained a big worry for the industry.

Steel exports reached 2.29 lakh tonnes in December reversing from a negative trend in November when exports had dropped to 1.8 lakh tonnes from 2.4 lakh tonnes in October, official sources said.

They attributed recovery in exports to price stabilization and withdrawal of 15% export duty on long steel products, besides restoration of tax refunds (DEPB) for the sector in the October-November period.

Though prices stabilizing around 550-600 dollar per tonne have generated some buying interest, sales realizations have remained quite low. Prices had peaked to 1,200 dollar per tonne in June 2008 resulting in a windfall for the industry.

However, the industry is a long way from seeing a revival in demand. "In the midst of the global economic downturn, the demand for steel plummeted in the international market," Steel Secretary P K Rastogi said.

For the April-December period, steel exports have declined by 24% to 2.7 mn tonne from 3.5 mn tonne in the comparable period of last fiscal. With the automobile and construction industries reeling under the global downturn exports for the flat products dropped by 25% in April-December over the year-ago period.

Posco in talks with Toyota to supply steel

Posco, the biggest South Korean steel maker, said on Monday that it was in talks with Toyota Motor to supply steel to the world's top auto company, which is seeking to cut costs as it heads for its first-ever annual operating loss.

Posco, one of the biggest global steel makers by output, has steel supply contracts with all major Japanese car makers for their Japanese output except Toyota.
"We are in talks with Toyota on a similar deal," a Posco spokeswoman, Ko Min Jin, said.

Posco, which earns around 70 percent of its revenue in the domestic market, sells its products at a relatively low price compared to regional rivals and a weaker won currency is also helping it gain price edge in the overseas market.
"The deal is very likely as Posco is already selling steel for Toyota for production in Thailand," said Eom Jin Seok, a Kyobo Securities analyst.

"Any deal will be positive for Posco as it will add a stable customer base at a time when domestic demand for cold-rolled steel is sure to decline."
The move is also likely to help Toyota, the biggest single customer of the world's second and third largest steel firms, Nippon Steel and JFE, which trail ArcelorMittal, press for a cut in steel supply prices.

Toyota plans to halt output at its domestic plants for 11 days in February and March, while Hyundai Motor, the top South Korean top auto company, plans to cut domestic output by up to 30 percent in the first quarter as drivers put off big-ticket purchases, leaving dealers' lots full of unsold cars.
Shares in Posco were down 4.2 percent to 378,000 won in late morning trade, lagging a 1.7 percent drop in the broader market.