This has forced Indian steel manufacturers, led by private sector giant Tata Steel, to swing its export focus around from the Asia Pacific region to India's neighbouring countries, West Asia, and, surprisingly, Europe (where steel demand has been growing at just about one per cent a year).

Pushing steel in the new regions is not going to be an easy task for the Indian companies, because demand in the Asia Pacific region, to which Indian companies led by Tisco have been the largest net exporters by far, has traditionally grown at a high average rate of seven per cent per annum in the past, whereas the demand growth in North America has plateaued, and that in Europe grew last year by just about one per cent.

The "trade reversal" has happened due to the tremendous devaluation ofregional currencies in Asia-Pacific, allowing manufacturers to quote very low dollar prices for their products.

The reversal situation has been exacerbated by the fact that the domestic demand for steel is estimated to have fallen by one per cent in 1997-98, in the face of higher output recorded by every Indian steel manufacturer.

It is absolutely imperative for Indian steelmakers, therefore, to export their products.

While some companies such as Essar Steel have tried securitising their export receivables, according to sources in Tisco, this can also prove to have a downside because it locks the exporting firm into a higher exchange rate in a scenario of high currency depreciation. Since the rupee is widely believed to be ready for more depreciation, Tisco has avoided going into block-securitisation deals, and will go into them only on a case-by-case basis, said the Tisco source.

The prices of various steel products have been crashing in the international market for nearly 24 months. CR coilsheetprices have fallen from $459.3 per tonne to $420 per tonne in February this year, implying a nearly 10 per cent price crash. HR coilsheet prices have fallen from $347.3 per tonne in September 1997 to $320 per tonne, that of rebars have fallen from $306.7 per tonne to $300 per tonne, and that of wire rods have fallen most precipitately, from $397.3 per tonne to as low as $335 per tonne.

Indian steel companies are keeping their fingers crossed on the possibilities of China, whose share in world merchandise trade in 1997 grew by a whopping 21 per cent, devaluing its currency. If that happens, Indian steel exporters will face sharper competition than ever before and will find it very difficult to push steel output into the international market.