NEW DELHI -- Indian steel manufacturers, anticipating a flood of cheap imports over the next three months, Wednesday demanded the immediate imposition of a safeguard tax during a meeting with federal government officials.

A senior steel industry official, who did not want to be identified, said that as much as 700,000 metric tons of hot-rolled coils, an intermediate steel product, are expected to land on Indian shores between May and July from Ukraine and Turkey.

The imports have been contracted at prices $400-$415/ton at Indian shores, while Indian prices are $500-$540/ton, officials said.

Domestic steel makers are pushing for the levy of a 23% to 25% safeguard tax on hot-rolled coil imports. Government officials said the steel ministry is likely to impose a safeguard tax of 25%.

"Our capacity utilization is low and we are losing market share," said an industry official who attended the meeting but declined to be identified. "There is a strong case for a safeguard tax."

Earlier this year, India's federal government imposed a similar safeguard tax on aluminium products from China and imposed an anti-dumping duty on some stainless steel products to curb cheap imports.

"There will not be much impact on local prices (from the proposed safeguard tax)," Executive Director Vinod Garg of Ispat Industries Ltd. said, as it would be a temporary restriction for a specified period.

There has been a rise in demand from the construction and automobile sectors, and user industries are running low on inventories, Mr. Garg said.

Consumer goods and other industry sectors that buy steel are not in favour of a safeguard import tax, because it would increase their cost of inputs.

However, the government is likely to favour the interests of domestic steel manufacturers over those of the makers of value-added products, as it is keen to boost the country's domestic steel output. The government targets annual production of 124 million tons of steel by 2012. The country produced 56.4 million tons in the fiscal year that ended in March.

By ARPAN MUKHERJEE
Write to Arpan Mukherjee at arpan.mukherjee@dowjones.com

MAY 6, 2009, 5:30 A.M. ET

Source: online.wsj.com