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Chinese threat to Indian steel mills seems real
 MUMBAI
NOVEMBER 16, 2008 The Indian steel industry,
which is currently bearing the twin impact of a
sharp fall in demand and a cut in production, could
likely face a bigger blow post December, when China
plans to lift export tax on steel. China, which is
the world’s largest steel market, has recently
proposed to remove the existing 5% levy on its steel
exports from December 1, in a bid to boost the local
steel industry which has been severely hit by the
global slowdown. China had earlier imposed export
duty up to 15% to discourage exports, as local
demand was high and steep domestic steel prices were
affecting the local economy.
According to Indian primary steelmakers, this move
by China could likely lead to an increase in steel
imports from China, especially as India currently
has no import duty to check such a move. Duties were
removed in April.
India annually imports about 3.6 to 4 million tonnes
of steel of various categories, of which, last year,
about 1 million tonnes came from China alone. If
this year too Chinese steel of the same quantity
comes to India, then the industry would be severely
affected, said the senior official of a large
private steel company.
The Indian steel industry is witnessing trying times
as demand has slowed down sharply and companies are
forced to cut production to keep operations viable.
Although most Indian companies are reluctant to
officially announce production cuts, it has been
widely reported that all companies have slashed
output by an average of 30%.
This is mainly to counter the sharp fall in prices
of hot rolled coils that have seen lower offtake due
to slow demand for user industries such as cars and
consumer goods. Also with international prices
softening sharply, Indian steel makers were prompted
to cut their product prices also.
As the government had asked steel companies to
maintain prices to stem inflationary pressures at a
time when internationally prices were rising, the
fall in Indian steel prices, when it finally came
was relatively less about 20-25% compared to the
40-50% fall globally. The threat of imports at such
a time has led Indian steel producers to ask for
imposition of import duty in the range of 5% to 10%
to protect the local industry from Chinese steel.
The government has already taken certain steps in
that direction. From October 31, India has withdrawn
export duties on certain iron and steel products
after the prices fell. Duties on products such as
pig iron, billet and long products including angles
and sections were imposed in May and revised in
June.
Indian steel companies say that the local steel here
is unfairly placed with respect to Chinese steel as
their government provides subsidy to raw materials.
This lowers cost of production. When coke prices
internationally were at $550 per tonne, Chinese
steel manufacturers were reportedly buying coke at
$300 per tonne. â€oeThis places Chinese steel
manufacturers at an unfair advantage compared to
us,†said one
steelmaker. While Tata Steel and the state-owned had
captive resources, private steel companies such as
Essar Steel, JSW Steel and Ispat Industries bought
iron ore and coke from the market.
The Vinod Mittal-run Ispat Industries has defaulted
on a Rs 100-crore repayment to UTI due to the
current slowdown. It had earlier asked state-run
NMDC to reduce iron ore contract prices, after the
state-run ore producer had raised prices despite a
fall internationally. This is in line with a recent
development where Brazilian iron ore major CVRD
withdrew a 12% price increase to Asia, after
steelmaker clients asked the ore producer to
consider the impact from the global financial crisis
and the slowing demand for steel.
Interestingly, it has been reported that the Indian
steel ministry has written to the finance ministry
for re-imposing import duties on steel, although no
decision has been taken as yet.
Source: The Economic
Times
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