Steel producing and consuming industries are divided on the government’s decision to delay imposition of safeguard duty on flat and hot rolled steel. Countries such as Ukraine, Russia and China have been dumping steel in India at much cheaper rates. While domestic producers are selling hot rolled coil at about $550 a tonne, the price of the imported metal is lower at $430 a tonne.

“Steel makers across the globe, who have built up large inventory, have started dumping their products at distressed rates in markets such as India, where there was still some demand,” an industry official said.

With the Indian economy still recording the second fastest growth rate in the world, it has become a favourite destination for overseas producers, resulting in a surge in imports of certain products.
However, the price differential between the products of domestic companies and those imported of as much as $100 per tonne is not good news for domestic producers. N C Mathur, director Jindal Stainless (JSL). “All major steel companies, including Steel Authority of India, Tata Steel, JSW Steel, Essar Steel and Ispat Industries will be impacted by the decision to defer safeguard duty,” Mathur said.

The demand for alloy can well be gauged by the sales numbers over the past three months — for April, the Steel Authority of India and Tata Steel both clocked about 30 per cent jump in sales. During January to March, the two companies witnessed 10 per cent increase in sales every month.

The steel consuming industry is, however, worried as many of them use some of the products on which the directorate general on safeguards was considering the additional import duty. The consuming industry is also contemplating moving the court in case the duty is levied.

“Imposition of safeguard duty on hot rolled coils will impact small factories, as prices will increase. In fact, steel prices have already gone up by Rs 1,000 a tonne from May,” P D Sharma, president of Ludhiana-based APEX Chamber of Commerce and Industry, said. The chamber represents manufacturers of cycles and auto parts besides others.

Earlier, domestic steel producers, led by Essar Steel and Ispat, had approached the government for immediate imposition of safeguard duty on key steel items. The industry had sought imposition of 30 per cent safeguard duty on products from countries including Ukraine, Russia and China, as they had to reduce prices by half between September 2008 and February 2009.

Safeguard duty is a temporary measure aimed at protecting the local industry from the surge in cheap imports. The need for safeguard duty arose the recession struck global markets late last year, leading to a sharp slump in steel demand.

In April, the finance ministry had notified a maximum levy of $1,823 per tonne on import of cold-rolled flat stainless products, mainly used by the automotive industry, for a period of six months, as recommended by the directorate general of anti-dumping and allied duties.

Commerce secretary G K Pillai, after hearing the views of the steel consuming industry, deferred a decision on the proposal to impose safeguard duty on hot rolled coil and flat steel by two months, said “We felt that not enough homework had been done and there is a need to consult both the domestic industry and other interested parties concerned”. He added that the DGS would consult the user industries and come back to board after 60 days.

The commerce secretary, however, agreed that imported steel hot rolled coil was still cheaper than the domestic produce — a case made by steel makers to demand import curbs — but suggested that steel companies should consider lowering their prices to beat competition from imports.

By Alok Sharma

Source: www.mydigitalfc.com