4 min read . Updated: 21 Jun 2022, 06:12 AM ISTLivemint
· Steel exports, which had reached a record high of 18.3 million tonne last fiscal, continue to see momentum because of the disruption caused by the ongoing Russia-Ukraine conflict
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India’s steel exports will decline 35-40% on-year to 10-12 million tonne this fiscal following the 15% export duty imposed on several finished steel products last month, a Crisil Research analysis showed on Monday.
Steel exports, which had reached a record high of 18.3 million tonne last fiscal, continue to see momentum because of the disruption caused by the ongoing Russia-Ukraine conflict. Russia is a key exporter of steel, coking coal and pig iron.
In addition, the European Union’s (EU) move to raise India’s export quota –- amid a widening differential between steel prices in the two geographies –- benefited domestic steel makers, and limited the impact of a 25% tariff on steel imports imposed by the EU.
While steel firms enjoyed fat realisations overseas, domestic demand grew 11% on-year, driving domestic prices to all-time highs. This led to soaring construction costs and multiple price hikes by makers of automobiles, consumer appliances and durables to pass on the increase, thereby tamping domestic demand, Crisil said.
The hike in export duty was aimed at curbing this inflation.
“The duty-driven price correction will improve availability of steel in the domestic market as finished steel exports dwindle. This will directly impact India’s export volume in the current fiscal. Steelmakers will attempt to skirt the duties by bumping up exports of alloyed steel and billets, but that is unlikely to compensate for the loss of finished steel exports," said Hetal Gandhi, director, Crisil Research.
For the record, the government also hiked the export duty on iron ore to 50% and that on pellets to 45%, alongside slashing the import duty on coking coal, pulverised coal injection (PCI) coal and coke to 0% from 2.5%.
The duty revisions will have a material impact on the export volumes of iron ore and pellets. Unlike steel, where specific grades were targeted, iron ore and pellets are effectively under a blanket export duty. The combined export volume of iron ore and pellets is expected to see a massive drop from 26 MT last fiscal to 8-10 MT in the current one, and bring about a sharp correction in domestic prices. To be sure, merchant miners have already reduced iron ore prices by 25- 35% since the announcement.