The government has kept its promise to stand by the steel industry, facing the most challenging phase ever. India is the only major emerging economy to exhibit a positive growth in steel consumption despite a fluctuating fortune in the manufacturing sector and a shrinking investment scenario in infrastructure and construction.
The industry players are under extreme pressure of dwindling profitability and are incurring huge losses due to declining margins and subdued demand. Export realisation is equally low, an offshoot of surplus capacities and low international prices as major exporters like China, CIS njations, Japan, South Korea, Brazil and Turkey are selling steel even below their marginal cost.
Indian banks are heavily burdened with massive debts on account of the stalled projects in the steel industry (more than 30% of NPAs) that are wary to add capacity unless the demand scenario improves.
In the past two-and-a-half years, low-priced imported steel from China, CIS countries, Brazil and steel from Japan and South Korea under concessional duty (currently 0.25% against 12.5%) of RCEP agreements) had flooded the Indian market, dislodging the domestic producers in HR, CR, plates, coated products, wire rods, TMT and semis, and enhanced the import share from 9% in 2010-11 to 13% in the current period. The government had earlier supported the industry by enhancing import duties from 5% and 7.5% in long and flats by 5% each, and also imposed Safeguard duties of 20% on import of HR coil of over 600 mm width in standard basic grades in September 2015 for a period of six months.
All these measures could not stem the flow of imports as international prices of all steel items nosedived during the period, based on steep decline in iron ore and coking coal prices and stagnant or declining demand growth in most steel-producing countries.
Many of the trading partners, particularly China and the CIS countries, made steel available at lower than the cost of production just to sustain the massive facilities created over the years, leading to a totally irrational level of predatory prices that damaged and distorted the markets in India and some other countries. Most disappointing for them was the fact that all the incremental growth in domestic demand (5-6%) was met by the low priced imports that reached a dumping level. The antidumping and countervailing investigations being time consuming, the government has given a temporary relief for 6 months to the steel industry by fixing the minimum import prices for 173 products under HS Code # 72.
Source: FE