Russia-Ukraine war: Steel exports to EU and MENA countries to increase, says Jindal Steel MD

What has been the repercussions of the ongoing conflict between Ukraine and Russia on the steel industry? What would it really mean for prices on one hand and exports on the other for the larger steel industry as such?
There are two effects of this Ukraine Russia war; one is opportunity and the others are threats. The opportunity for the Indian steel industry is to export more and more to the European Union and also the Middle East and North African (MENA) countries. This market has opened in a big way for the Indian steel producers. So, this is the positive factor, the opportunity in this particular war.

The threat or the challenges are the energy prices. The energy prices, going up from $90 to $100 to over $120 now are the pain points. Some of the reports say that it may reach $150 or in times to come, maybe $180 per barrel. So this is a very huge and steep increase. So, why the energy prices are increasing is yet to be understood but there is a ray of hope if the Rouble Rupee trade starts. Then India can sign a deal with Russia at a 25-30% lower rate of oil per barrel. If we get a 25% or 30% discount per barrel on oil from Russia, that will be the best deal for India.

Once such kind of deals are in place with Russia via Rosneft, then this will impact the world energy prices in terms of bringing down the oil prices worldwide, because if such a deal happens with India in Rouble Rupee trade, then a similar deal may happen with China. China already has RMB to Rouble trade for so many years. These two countries – China and India – can bring down or pull down the international energy prices.

When it comes to steel prices, Russia currently has about 4% share in the global steel production. Where do you see global steel prices headed because of the supply vacuum which has been created and is it going to lead to a further push for steel exports from India?
For sure, the steel exports from India will increase because this is a good market today as far as the spot market is concerned. Perhaps all the Indian mills must be taking a share of the total pie. Yes, the steel prices have gone up by Rs 5,000 a ton in the last three weeks; the reason being coking coal prices have gone up by $545-550 a ton and the oil prices have also gone up.

Internationally, higher Brent crude prices have also led to increase in the prices of the international freights. The Supramax used to be at about $18,000- 20,000 a day for daily hire and now it has reached about $28,000-30,000 a day. That has impacted ocean freight rates. So, the prices of ferroalloys, the speciality alloys like Nickel and manganese and many more alloys like niobium and titanium have gone up and similarly, the coking coal prices and iron ore prices have gone up in the international market.

So, the cost of production has gone up by Rs 5,000 a ton. That has an impact on the domestic consumers but when we export to Europe or to the Middle East, then these increased input costs can be set off easily because the prices in Europe are much higher than the prices in India. Today for example, hot rolled coil prices in Europe are about $1,200-1,250 a ton whereas in India it is about $950 dollars a ton and that is the major difference. So the spot market prices are good, steel industry will definitely benefit out of it.

Can we see margin expansion clubbed with an increase in your volumes?
Yes, there will be a marginal margin expansion increase in terms of spot market international prices. As I said, the difference in between spot market international prices and the domestic prices is about $200 to $250 as of now. So, the more the exports, the more the profit. That will definitely set off some of the losses from sales to the domestic customers especially to MSMEs. So that will give a setting off or say trade off business and we can earn more in exports and we can earn little less in domestic but yes the average increase in EBITDA is likely to be there in the last month of this particular quarter.


Given that 35% of the revenue comes from the export market and you already have a presence in over 30 countries you spoke about the export opportunity. Have you already started seeing higher export orders because it seems to be a very time sensitive opportunity if Indian players do not grab it as of now?
Yes, we are already booking orders up to 35% to 40% of our total produce and this we will continue. We have orders up to April supplies and down the line we will be booking orders up to May also.

Where are our steel prices headed? What kind of price hikes are inevitable? All of this has a cascading impact on infrastructure contracts. Will cost escalation clauses need to be invoked?
It is very difficult to predict steel prices. As of now, we are waiting for the day ceasefire is declared then I am sure the prices will start stabilising. And the energy prices – including coking coal prices, domestic steam coal prices – everything have gone up and this can only be arrested by stopping this war.

Also, the different governments will have to act very swiftly to control the energy prices. Otherwise, these prices will keep on rising and we do not know where the prices will reach unless people start buying less. But it is very difficult because across all commodities, the prices are going up.

So it is not only steel but also aluminium, copper, nickel – everywhere the prices are up. This kind of situation is unpredictable as of now but today, whatever the prices are – the metal industry, the steel industry are getting a reasonable amount of profit and I would say additional profit from exports. This will continue till this war ends.